What characterizes an "insurance contract"?

An insurance contract is characterized as a legally binding agreement for risk protection because it involves the insurer and the insured entering into a formal agreement where the insurer agrees to provide financial protection against specific risks in exchange for a premium. This contract outlines the obligations of both parties, including coverage details, exclusions, and the circumstances under which claims may be filed. The legal binding nature of the contract ensures that both the insurer and the insured have enforceable rights and responsibilities, which is crucial for the operation of insurance as a financial safety net. This distinct aspect separates it from casual verbal agreements or provisional documents, which do not carry the same level of legal enforcement or commitment. Additionally, while coverage limitations are often included within an insurance contract, they are not what fundamentally characterizes the contract itself.