A promise of compensation for specific potential future losses in exchange for a
periodic payment. Insurance is designed to protect the financial well-being of an
individual, company or other entity in the case of unexpected loss. Some forms of
insurance are required by law, while others are optional. Agreeing to the terms of an
insurance policy creates a contract between the insured and the insurer. In exchange
or payments from the insured (called premiums), the insurer agrees to pay the policy
holder a sum of money upon the occurrence of a specific event. In most cases, the
policy holder pays part of the loss (called the deductible), and the insurer pays the
rest. Examples include car insurance, health insurance, disability insurance, life
insurance, and business insurance.
