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What is an insurance policy?

UPDATED: February 20, 2013

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An insurance policy is a legally binding contract between an insurance company and the person who buys the policy, commonly called the "policyholder", who also is often the person insured.

In exchange for payment of a specified sum of money, called the "premium," the insurance company agrees to pay for certain types of loss or damage as specified by the contract. When a loss occurs which meets all of the requirements described by the terms of an insurance policy, the loss is said to be "covered" by that policy. The term insurance policy refers specifically to the written contract. You probably have other documents that may or may not offer you additional rights, including your application, any correspondence from the insurer, summary plan descriptions (for disability and medical insurance), and your declarations page (often shortened to “dec” page).

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