An insurance policy is a contract between the insurer and the insured which determines the claims which the insurer is legally required to pay. For payment, the insurer pays for damages to the insured which are caused by covered expenses under the policy language. Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts. Since insurance policies are standard forms, they have a special language which is similar across a wide variety of different types of insurance policies.
The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer.
Examples of Insurance policies
Insurance policies are of different types and I have mentioned them as below:
- Auto / vehicle insurance protects the policy holder against financial loss in the event of an incident involving a vehicle he or she owns for example in road accident.
The insurance coverage includes:
- Property coverage, for damage to or theft of the car.
- Liability coverage, for the legal responsibility to others for injury or damage.
- Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost money and funeral expenses.
- Life insurance provides a monetary benefit to the beneficiary’s family, and may specifically provide for income to an insured person’s family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or annually.
Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.
- Burial insurance is an old type of life insurance which is paid out upon death to cover final expenses, for example funeral expenses.
- Liability insurance covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a home loan or mortgage insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who gets injured on the property. Automobile / motor vehicle insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others’ lives, health, or property. Liability policies typically cover only the negligence of the insured, and will not apply to results of intentional acts by the insured.
- Credit insurance repays some or all of a loan when certain circumstances arise to the borrower such as unemployment, disability, or death. Many credit cards offer payment protection plans which are a form of credit insurance.
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