What is insurance
Insurance is a written contract between an insurance company (insurance company) and an individual or entity for which the insurance company provides financial loss protection. Insurance companies are able to provide this protection by sharing the risk of a large group of individuals and entities with similar risks. need
Insurance is usually designed to protect you in the event of a loss that you would not otherwise be able to pay for such as if you completely damage your car or require expensive surgery. If you do not have insurance you may be 100% liable for all associated costs and expenses in the event of an accident. 1 Learn more About how insurance works and the types of insurance available.
Definition and Example of Insurance
An insurance policy is a legal contract by which a person or entity receives protection from an insurance company against unexpected financial losses. In the event of a covered unforeseen event the insurance company will cover your losses in exchange for premiums. 2
Let's say you just bought a car and want to purchase insurance as required by your state. You and the insurance company will enter into a contractual agreement in which the insurance company agrees to protect your car from certain types of damage. After six months you have participated in a Accident that destroyed the front fender. If your auto insurance policy is in effect and your fender damage is covered your insurance company will pay for repairs to any degree or limit set forth in your policy.
How Insurance Works
Insurance is a way of managing unforeseen risks. The tool to do this is a written contract between the insurance company (the insurance company) and the policyholder (the person or entity that gets the policy) - these documents are the insurance policy.
An insurance policy remains in effect for a specific period called the policy term. When the term ends you usually have the option of renewing or terminating the policy or purchasing a new policy. When you purchase an insurance policy you should be aware of its coverage if there are any exclusions that limit coverage As well as your liability to the insurance company for damages.
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