What is an insurance policy?

An insurance policy is fundamentally a contract between the insurer and the policyholder, outlining the terms and conditions of the insurance coverage. This document specifies what risks are covered, the benefits provided, the responsibilities of both parties, the premium amounts due, and any exclusions or limitations on coverage. By establishing this contractual relationship, both the insurer and the policyholder have a clear understanding of their rights and obligations.

While premium payments are integral to the policy, referring to the policy merely as a legal document for premium payments does not encompass its broader purpose and function. The statement of coverage exclusions is part of the policy but does not define what the policy is in its entirety. Similarly, a guide for filing claims is useful but is only a procedural aspect of insurance claims and does not represent the essence of what an insurance policy is. The core element remains the contractual nature of the agreement between the insurer and the policyholder, which is encapsulated effectively in the correct answer.