Question

Insurance is a kind of protection against financial losses. The Life Insurance Corporation of India (LIC) mainly looks after the insurance of a person’s life. It also has policies like new children’s money back policy, health plans and pension plans.

In this context, answer the following question:

What is a policy?

Answer 1

A policy is the written contract between an insurer and the person seeking insurance (the insured). It records the terms of the agreement, what risk is covered, who the insured and beneficiaries are, the sum assured (benefit), the premium to be paid, the policy term, and any conditions or exclusions. In life insurance, for example, with LIC, this contract is explicitly called a “policy” and it exists to protect the insured/their family against financial loss (e.g., loss of income on the insured’s death).