Although the words “insurance policy” and “insurance contract” are often used interchangeably, there are important distinctions. An insurance policy is simply a recitation of terms and conditions which do not attach to a particular person, item or interest. However, an insurance contract creates contractual obligations between the parties: the insurance company undertakes to indemnify the policy holder against certain losses or injuries in return for a payment called premium.
Insurance agreements contain provisions about who the insured is, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles (amount which can be deducted), the policy period and premium amount, together with the exclusions (a clause in a contract which excludes or restricts liability or legal duty which would otherwise arise) and the endorsments, to name but few.
KEY VOCABULARY
to attach to
contractual obligations
deductibles
endorsement
exclusions
to indemnify against
insurance policy
insured
insuring company (insurer)
interchangeably
premium
policy holder
policy limits
recitation
to restrict
risk
to undertake
