A collective policy is issued when a risk is:

A collective policy is typically issued when a group of individuals or entities pools their resources to cover a common risk, which is effectively what happens in co-insurance arrangements. In such cases, multiple parties share the financial responsibility for the risk, with each contributing to a single collective policy. This setup provides coverage to several insured parties under one policy rather than requiring each entity to purchase individual policies.

Co-insurance models facilitate lower premium costs through shared risk and can often lead to broader coverage options without the need for each participant to negotiate separate agreements. Such arrangements make it easier to manage risks, as they allow group members to benefit from collective bargaining power and reduced administrative overhead.

In contrast, reinsurance involves one insurer transferring portions of its risk to another insurer to reduce the likelihood of paying a large obligation. Self-insurance means that an individual or entity retains its own risk, while dual insurance refers to a situation where two policies cover the same risk, often leading to disputes over claims. Thus, these options do not apply to the principles underlying collective policies.