The Meaning of Insurance

In law and economics insurance is a form of risk management primarily used to protectagainst the risk of a contingent loss uncertain. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. The insurer is a company selling insurance, the insured or policyholder is the person or entity purchasing the insurance policy. The insurance rate is a factor used to determine theamount to be received by a certain amount of insurance coverage, called the premium.Risk management, the practice of risk assessment and control has been developed asa discrete field of study and practice.
The transaction is that the insured assumes a guaranteed and relatively small lossknown as payment to the insurer in exchange for the promise of the insurer tocompensate (indemnify) the insured in the event of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions andcircumstances in which the insured will be compensated financially.

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