In insurance terminology, the term Insurance refers to a type of upfront contract agreed between a financial institution and an individual in which the individual receives monetary reimbursement from the financial institution to offset the risk of an undesirable outcome. The individual or institution may hedge a risk of an outcome for monetary compensation or damages incurred to their person or property. Insurance can be sold on just about any type of physical possession, as well as on people’s lives and physical assets.
For example, the use of Insurance effectively transfers the risk of loss from the owner of the physical asset insured to another entity, usually an insurance company, in exchange for a payment known as an insurance premium. Insurance is generally sold as a policy and represents an effective way to manage the risk of ownership on a myriad of physical assets, as well as on one’s life, in the case of life Insurance. The payment for an Insurance policy is generally made periodically by the insured to the insurer. In the event of the loss of insured property, the Insurance policy holder must file a claim with the insurer providing all the details of the loss before receiving reimbursement.