Insurance Policy

Insurance is a provision made in advance as a buffer against exigencies. An insurance policy is a legally enforceable contractual document. Through this document, the contract drafter, an insurance company, known as the insurer, makes a promise to pay a clearly defined sum or sums of money in case of occurrence of some well-defined event(s).

These well-defined events may be directly related to a person. In that case, such a person, the owner of an insurance policy, is known as the insured for purposes of an insurance contract. An insurance policy document includes a clearly identifiable description of the above cited person.

Alternatively, these well-defined events may be indirectly related to the above-cited owner of an insurance policy. This will be so when these well-defined events are directly related to a well-defined item or items owned by the above person. In that case, such an item (or items), is/are known as the insured for purposes of an insurance policy.

An insurance policy further includes a description of these well-defined events, known as risk coverage clauses. It also specifies the enforcement tenure of an insurance policy, known as the term of an insurance policy. It also specifies a periodic sum (fixed or variable) that will be required to be paid by the owner of an insurance policy to the insurance company. This periodic sum is known as the premium.

An insurance policy may further specify a well-defined sum of money in it, which is known as an insurance deductible. This is the maximum amount that the owner of an insurance policy needs to pay to remedy the loss that the owner has sustained, in case of occurrence of a well-defined event(s).

An insurance policy will also include detailed terms and conditions that define and limit the scope of the implementation of the said promise(s) made by an insurance company. These terms and conditions will also specify the complete procedure that the owner of an insurance policy (or on his/her death the legal heir(s)) will need to follow in case the above-cited well-defined event(s) occur(s).

In such a case, the owner of the policy will lodge an insurance claim application with the insurance company to inform it of the occurrence of the said event and to ask them to implement their promise made in the insurance policy.

An insurance policy may also specify some optional entries. These entries will be made in case the owner of an insurance policy has opted for risk coverage towards such optional well-defined events at the time of applying for an insurance policy. Obviously, when more options are chosen, the more premium will have to be paid by the policy owner to the insurance company.

Insurance companies cover risks due to losses, injuries, or damages sustained by third parties due to occurrence of well-defined events as a compulsory provision in an insurance policy. Owner's losses are mostly provided optional status. These provisions are made as per US federal and state laws.

Insurance Policy |