Insurance is a contractual agreement between an individual or entity (the insured) and an insurance company (the insurer) where the insured pays a premium in exchange for financial protection or reimbursement against specified risks or losses. The purpose of insurance is to provide financial security and peace of mind by transferring the risk of potential loss from the insured to the insurer.
The insurance policy is a legal contract that outlines the terms and conditions of the insurance coverage. It includes details such as the coverage provided, exclusions, limitations, deductibles, premiums, and the duration of the coverage. Overall, insurance serves as a risk management tool, allowing individuals and businesses to protect themselves financially against unforeseen events and losses. By spreading the risk among a large pool of policyholders, insurance helps to mitigate the financial impact of adverse events and provides a safety net for individuals and communities.