An insurance policy is a contract between an individual or entity and an insurance company. It outlines the terms under which the insurer agrees to provide financial protection against specific risks, such as accidents, health issues, or property damage. The policyholder pays a premium, which is the cost of the insurance, in exchange for coverage. The policy details what is covered, the limits of coverage, and any exclusions. It also explains the process for filing a claim if a covered event occurs. Common types of insurance policies include health insurance, auto insurance, and homeowners insurance.