What constitutes a Policy in insurance?

A policy in insurance is fundamentally a contract that outlines the specific terms, conditions, coverage limits, and exclusions agreed upon by the insurer and the insured. This document serves as the basis for the relationship between the two parties, detailing what is covered under the insurance plan, the obligations of both parties, and the procedures that need to be followed in the event of a claim.

A verbal agreement lacks the formal structure and legal enforceability that is associated with written contracts. While informal understandings may exist, they do not hold the same weight as a legally binding document. Similarly, a guideline for claims processing does not encompass the comprehensive nature of an insurance policy; it is merely a set of procedures rather than a contract of coverage. Thus, the defining characteristic of an insurance policy is that it is a formal, written contract that delineates the specifics of coverage for the insured.