What is an Insurance ?

 Insurance is a means of protection against financial loss in which, in exchange for a fee, one party undertakes to indemnify another party in the event of certain loss, damage or injury. It is a form of risk management that is primarily used to hedge against the risk of contingent or uncertain loss.

The entity that provides the insurance is known as an insurer, insurance company, policy holder or underwriter. The person or entity that buys the insurance is called the policyholder, while the person or entity that is covered by the policy is called the insured. An insurance transaction involves the policyholder assuming a guaranteed, known and relatively small loss in the form of a payment to the insurer (premium) in exchange for the insurer's promise to indemnify the insured in the event of a covered loss. The loss may or may not be financial, but must be reducible to financial terms. Furthermore, it is usually something in which the insured has an insurable interest based on ownership, possession or a pre-existing relationship.

The insured receives a contract called an insurance policy that details the terms and circumstances under which the insurer will indemnify the insured or his designated beneficiary or assignee. The amount of money charged by the insurer to the policyholder for the coverage specified in the insurance contract is called the premium. If the insured suffers damage that is potentially covered by the insurance contract, the insured submits a claim to the insurer for processing by the claims adjuster. Mandatory out-of-pocket payments that are required by the policy before the insurer will pay for the insured event are called deductibles (or deductibles if required by the health insurance policy). An insurer can insure its own risk by taking out collateral, with another insurer agreeing to bear some of the risks, particularly if the primary insurer deems the risk too large to bear.

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