This has to do with risk management; insurance is used to guard against the risk of an uncertain, sudden and unpreventable loss. Now to the definitions, according to wikipedia our online dictionary, iinsurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. Insurance involves pooling funds from many insured entities (known as exposures) in order to pay for relatively uncommon but severely devastating losses which can occur to these entities.
Doesn’t sound like I’m speaking English right. Ok, I translate. It simply means that insurance is a way for you to guard against loss of something precious to you. For example if have an accident, you’ve lost your car, if there is fire outbreak at home, you’ve lost the house. So to guard against the money you will lose from theses accidents, you need insurance, you’ll engage an insurance company to get your money back. Now instead of loosing out entirely and maybe waiting for a pay raise or looking for a new job with so you can buy another car or going to take another to buy a new house your insurance company takes care of that. The insurance company will replace your car or house or whatever it is you have lost.
For this work money must have exchanged hands, I mean you will have put down some money in the company’s coffers. Because they are Father Christmas that gives anybody that has accident money to get another vehicle. You have to be putting money in an insurance company, an agreed amount each day, week, month, biannually or yearly. Then in the event of a sudden and unpleasant happening the insurance pays you money. With the money you can replace what you have lost in the sudden happening. You can get yourself a new car or buy a new house.
Now this doesn’t mean you can lose your car or burn your house through carelessness and even deliberately and expect to get paid. No, it doesn’t work that way. The insurance company will do a thorough investigation on the accident before parting with their money. They have to be sure that they are wisely spending their money.
It is not everything that can be insured, there are some things that can be insured while others cannot. But the popular things that can be insured are house, car, life, etc.