According to the definition by law and economics, insurance is defined as a form of risk management basically used to circumvent against the risk which is caused by a conditional, uncertain loss. It can also be defined as an even transfer of the risk of a loss which goes from one entity to another in exchange of certain payment. This payment is also called the insurance premium amount. The insured is the person or the entity who is holding the policy and the insurer is the company who is taking the payment in exchange of the policy and the services to be given.
The rate of the insurance is the factor which decides how much will be the premium amount of a policy holder. In case of any damage causing a small loss or a greater one, the insurance company is liable to pay the loss amount to the claimant. The insurance policy has all the rules and regulations including other details needed. The rules and regulations explain the conditions when an insurer is supposed to get the insured amount.
Insurance can be done for many things. Auto insurance is very common where the policy holder is paid back for the loss in case of damage caused to the vehicle due to accident, theft, fire and flood. There is insurance for house where the insurer is paid back by the insurance company in case there is a damage caused to the house due to flood or earthquake. Now a days theft insurance for the valuable goods is also very common. There is health insurance where the insurer is paid back in case of hospitalization or any kind of health check ups. Life insurance pays the claim amount to the successor or the nominee of the insured person in case of death.