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What is insurance

Publish date 10 June 2014
What is insurance image

Insurance is the coordinated transfer of risk of possible loss from one entity to another against payment. This is a form of risk management used mainly for hedging against risk (uncertain loss).

An insurer (or insurance company) is a company that sells insurance. The insured person or the policyholder is the person who buys the insurance policy. The amount that must be paid to cover the risk of an insurance cover is called the premium. Risk management, risk assessment and control are nowadays being developed as a separate area of ​​practice.

The insurance transaction requires the insured to bear a certain, relatively small loss in the form of payment to the insurer in exchange for the promise of the insurer to compensate (indemnify) the insured in case of financial (personal) loss. The insured receives an insurance policy under the contract, which contains detailed information about the conditions and circumstances under which he will be financially compensated.