What is required for a policy to be considered legal?

For a policy to be considered legal, it must serve a legal purpose. This is a fundamental principle in contract law, including insurance contracts. A contract that does not have a legal purpose is unenforceable in a court of law. For example, a policy that covers illegal activities, such as insuring a property used for drug trafficking, would be void because it involves unlawful conduct.

While having a defined premium amount, covering property, and being signed by all parties can be elements of a valid contract, they do not independently determine the legality of the policy. Thus, the critical factor that ensures that an insurance policy is legally binding is that it serves a lawful purpose.