What is the definition of Insurance?

Insurance refers to a system by which risk and the chance of financial loss is spread among a large number of people, properties or businesses. This risk is taken on by an insurance company, which assumes the financial aspect of the risk, in return for a premium.

This means that the insurance company agrees to pay you indemnity for the loss of a person or a property in case something happens to that person or property. The individual does not have to carry the risk by himself, instead for a smaller amount (the premium), the insurance company will do that for him.

The agreement between the person (the one paying for the premiums) and the insurance company is stated in a legal document called an insurance policy.

Insurance may be optional (such as the decision to insure your life), but some insurance is mandated by law. This includes automobile insurance, workers' compensation and so on. Lenders may also require you to be insured to protect the loan they provided from getting defaulted in case something happens to you.

• Insolvency
• Misstatement of Age or Sex Provision
• Modified Premium Policies
• Moral Hazard
• Comprehensive Coverage