Insurance is a protective measure against financial loss. In this arrangement, one party pays a fee to another, who agrees to compensate for specified losses, damages, or injuries. It serves as a method of risk management, shielding against potential losses that are uncertain or contingent.
The provider of insurance is known by various names such as insurer, insurance company, or underwriter. The purchaser of insurance is called a policyholder, and those covered under the policy are referred to as insured individuals or entities. The insurance transaction involves the policyholder making regular payments (premiums) to the insurer in exchange for a promise to compensate for covered losses. These losses, though not always financial, must be definable in financial terms and typically involve an insurable interest.
Upon purchasing insurance, the insured receives a contract, known as an insurance policy, detailing the terms under which compensation will be provided. The premium is the amount charged by the insurer for the coverage outlined in the policy. When a covered loss occurs, the insured submits a claim to the insurer, which is then processed by a claims adjuster. Some insurance policies require the insured to pay a deductible or copayment before the insurer covers the claim.
