Policy (Contract)
A policy, also referred to as a contract, is the legally binding agreement between an insurance company (the insurer) and the policyholder that defines the terms, conditions, and obligations of coverage. It outlines what is insured, the benefits provided, the premium amount, exclusions, and the responsibilities of both parties. Once the insurer accepts the application and the first premium is paid, the policy becomes active and enforceable.
How It Works
In health, dental, life, or disability insurance, the policy, or master contract in group insurance, is the governing document that determines how claims are processed and benefits are paid. In Canada it usually combines several parts: a declarations page or schedule, wording that defines who qualifies as an insured, policy wording explaining the insuring agreement, conditions, exclusions and limits, and any endorsements or riders that change the standard wording for a particular risk. The policy is the full contract, not just the declarations page, certificate, renewal notice, or premium invoice, and it is the policy wording that controls the broader rights and obligations. Because insurance contracts rest on the principle of utmost good faith, both the insurer and the person buying the policy must be forthcoming about all details that might affect the contract.
Example:
If you buy an individual health and dental plan in Canada, such as a Green Shield Canada Prism plan, the policy document is your contract with the insurer. It identifies who is covered, when coverage starts, your premium-payment obligations, and the drug, dental and extended health benefits that are covered, along with the exclusions and limitations. Coverage like this is designed to supplement, not duplicate, your provincial or territorial government health insurance. The insurer must honour the terms stated in the contract as long as premiums are paid and the policy remains in force, and no agent has authority to change or waive its provisions.
What to Watch For:
A policy may include riders or endorsements that add, modify, or limit specific coverages, so read the wording carefully to understand exactly what those changes do. If you have group insurance, remember that the certificate of insurance you receive only summarizes the policy. The master contract held by the employer contains the full legal wording that governs all benefits, so the certificate alone may not tell the whole story.
