What Is Insurance?
What Is Insurance? Most people have some kind of insurance: for their car, their house, or even their life. Yet most of us don’t stop to think too much about what insurance is or how it works. Put simply, insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks (https://www.investopedia.com/terms/c/cross-liability-coverage.asp) to make payments more affordable for the insured. Insurance policies are used to hedge (https://www.investopedia.com/terms/h/hedge.asp) against the risk of financial losses, both big and small, that may result from damage to the insured or their property, or from liability for damage or injury caused to a third party.1 How Insurance Works A multitude of different types of insurance policies is available, and virtually any individual or business can find an insurance company willing to insure them—for a price. T...
