Definition

A way to shift potential financial losses from yourself to an insurer. It helps lower your personal risk by sharing the burden with a company.

What to consider

  • Review all covenant requirements carefully.
  • Ensure you can meet the obligations.
  • Seek clarification on any ambiguous terms.

Real world scenarios

  • An insurer outlined an insurance covenant in the policy to ensure compliance with payment terms.
  • A business agreed to an insurance covenant that required regular safety audits.
  • An individual’s policy included a covenant promising truthful disclosure of health information.

Related terms

Insurance & Financial Protection