Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.
Methods of insurance
In accordance with study books of The Chartered Insurance Institute, there are the following types of insurance:
- Co-insurance – risks shared between insurers
- Dual insurance – risks having two or more policies with same coverage
- Self-insurance – situations where risk is not transferred to insurance companies and solely retained by the entities or individuals themselves
- Reinsurance – situations when Insurer passes some part of or all risks to another Insurer called Reinsurer
Types of insurance
Any risk that can be quantified can potentially be insured. Specific kinds of risk that may
