Category: Insurance

Insurance is a means of protecting oneself against financial loss. It is a type of risk management that is primarily used to mitigate the risk of a contingent or uncertain loss.

An insurer, insurance company, insurance carrier, or underwriter is a company that provides insurance. A policyholder is a person or entity who purchases insurance, whereas an insured is a person or entity who is covered by the policy. Policyholder and insured are frequently used interchangeably, but they are not synonymous, because coverage can sometimes extend to additional insureds who did not purchase the insurance. In exchange for the insurer’s promise to compensate the insured in the event of a covered loss, the policyholder assumes a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium).

The loss could be financial or non-financial, but it must be quantifiable. Furthermore, it usually involves something in which the insured has an insurable interest as a result of ownership, possession, or a prior relationship.

The insured receives a contract, known as an insurance policy, outlining the terms and conditions under which the insurer will compensate the insured, or their designated beneficiary or assignee. The premium is the amount of money charged by the insurer to the policyholder for the coverage specified in the insurance policy. If the insured suffers a loss that may be covered by the insurance policy, he or she submits a claim to the insurer, who then forwards it to a claims adjuster for processing.

A deductible is a mandatory out-of-pocket expense required by an insurance policy before an insurer will pay a claim (or if required by a health insurance policy, a copayment). The insurer may hedge its own risk by obtaining reinsurance, in which another insurance company agrees to carry some of the risks, particularly if the primary insurer believes the risk is too large for it to bear.