Insurance refers to a contract between an individual or entity (the insured) and an insurance company (the insurer). It involves the transfer of risk from the insured to the insurer in exchange for a payment called a premium.
In simpler terms, insurance is a way to protect yourself financially against unexpected events or risks. When you have insurance, you pay a certain amount of money regularly to an insurance company. In return, the company agrees to help you financially if something bad happens to you or your property that is covered by the insurance policy.
For example, if you have car insurance and you get into an accident, the insurance company will cover the costs of repairing your car. Similarly, if you have health insurance and you need medical treatment, the insurance company will help pay for your medical expenses.
The purpose of insurance is to provide you with a safety net and peace of mind. It helps protect you from large financial losses that may occur due to unforeseen circumstances. By spreading the risk among many individuals who pay premiums, insurance companies can provide financial support to those who experience unfortunate events.
Overall, insurance serves as a means of managing and minimizing financial risks by sharing them with an insurance company.