What is the definition of an insurance policy?

An insurance policy is indeed defined as a legal contract between the insured and the insurance company. This contract outlines the terms and conditions under which the insurer agrees to provide coverage in exchange for the payment of premiums by the insured. It specifies the rights and obligations of both parties, detailing what is covered, the limits of coverage, the duration of the coverage, how claims are to be handled, and any exclusions or limitations that may apply.

In contrast, the other options do not fully encapsulate the meaning or legal nature of an insurance policy. While a statement of risk management strategies may be related to broader risk-taking concepts, it does not specifically define the contractual agreement involved in insurance. An informal agreement to settle claims lacks the formal legal standing of a written contract, and a document outlining coverage limits only would not provide the comprehensive details necessary to constitute a full insurance policy. Thus, the answer accurately reflects the essential functions and characteristics of an insurance policy as a legal contract.