Which statement is true regarding policy provisions and their enforcement?

The statement that both parties must adhere to provisions is accurate because insurance policies are legally binding contracts. This means that the insurer and the policyholder (the insured) have obligations defined by the policy's provisions. These provisions outline the rights, responsibilities, and expectations of both parties, ensuring that each side fulfills their commitments.

Failure to comply with these provisions can lead to disputes and may result in the denial of claims or cancellation of the policy. For example, if a policyholder does not pay premiums on time or fails to disclose important information, the insurer might have grounds to deny a claim. Conversely, if an insurer does not uphold its end of the agreement, such as failing to provide coverage for a specified event, the policyholder can seek legal recourse.

This understanding reinforces the principle that the relationship between both parties is governed by the agreed-upon terms in the policy, fueling the importance of compliance from both the insurer and the insured.