Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for money. 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.
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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 (indemnity) 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.
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