Define: Insurance Policy

An insurance policy is a contract between an insurer and the insured that requires the insured to pay a premium to the insurer in exchange for a benefit to be paid in the event of a loss.

An insurance policy is essentially a contract between the insurer and the insured.

The primary purpose of any insurance policy is to reduce financial losses resulting from various accidents or death by redistributing the risk among large numbers of people, also known as risk pooling. Specifically, the insurer agrees to pay the insured a specified amount in the event that the insured sustains a loss, as per the insurance policy agreement. In return, the insured is required to make premium payments in order to maintain the insurance policy. A given insurance policy may also include beneficiaries. An insurance policy is applicable to any form of indemnity, including life, health, casualty, auto, property, and etc. Insurers may offer insurance policy solutions to any individual able to pay or may contract with companies to offer special rates for group insurance.

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This glossary post was last updated: 29th March, 2024.