Which of the following best describes an insurance policy?

An insurance policy is fundamentally a contract between the insurer and the policyholder. This means it is a legally binding agreement that outlines the terms of coverage, including what risks are insured, any limitations or exclusions, and the obligations of both parties. This contract establishes the relationship between the insurer and the insured, detailing what the insurer promises to do in exchange for the premiums paid by the policyholder.

As a contract, the insurance policy sets forth the rights and responsibilities of both the insurer and the policyholder, ensuring clarity and mutual understanding regarding coverage. This is essential for the effective management of expectations and obligations in the context of insurance.

The other options do not accurately capture the comprehensive nature of an insurance policy. While a document outlining coverage limits is a part of the policy, it does not encompass the entirety of the contractual obligations involved. Similarly, a list of potential risks doesn’t represent the binding elements of the agreement, nor does a guide for filing claims encompass the policy’s purpose as a contractual document. The policy itself serves as a formal and legally enforceable agreement, making option B the most accurate description.