Insurance Policy

An insurance policy is a contract that details the specific risks covered by the policy and the expected financial compensation for losses. Policies can be specific to business and individual needs, such as identity theft. 

The components of an insurance policy are the premium, policy limit, and deductible.  

Premium – The price of a policy. To predict claim risk, the premium takes multiple variables into account depending on the type of insurance. For example, health insurance premiums account for age, gender, location, and health status.  

Policy Limit – The maximum amount an insurer will pay for a covered loss under a policy. Higher limits generally come with higher premiums.  

Deductible – An amount paid out of pocket before the insurer pays a claim. Deductibles deter large volumes of insignificant claims.