The term “insurance” refers to the concept of risk management and the protection against financial loss. It’s a form of risk transfer, where for a premium, one party (the insurer) agrees to compensate another party (the insured) for specific potential future losses or damages.
An “insurance policy,” on the other hand, is the actual contract that outlines the terms and conditions of the insurance coverage. It details what risks are covered, the limits of coverage, the premium amount, and the policy period. It’s the legal document that binds the insurer to provide the coverage specified in exchange for the premium paid by the insured.
In summary:
- Insurance is the overall system of managing and mitigating risk through financial means.
- An Insurance Policy is the written agreement that specifies the terms of the insurance coverage between the insurer and the insured.
