Purpose of insurance Its goal is to reduce financial uncertainty and make accidental losses manageable. It does so by replacing the payment of a small, well-known fee with an insurance premium to a professional insurer in exchange for assuming the risk, a large loss and a promise to pay in the event of such a loss. Insurance is a contract in which one insurer compensates another for losses caused by specific contingencies or hazards. It helps protect the insured person or their family from financial loss.
There are many types of insurance policies. Life, health, homeowners and car insurance are the most common forms of insurance. Insurance is a financial safety net that helps you and your loved ones recover after something bad happens, such as a fire, robbery, lawsuit, or car accident. When you take out insurance, you'll receive an insurance policy, which is a legal contract between you and your insurance provider.
And when you suffer a loss covered by your policy and file a claim, the insurance pays you or a designated beneficiary, called a beneficiary, according to the terms of your policy. In the United Kingdom, the Crown (which, for practical purposes, meant public administration) did not insure properties such as government buildings. Captive insurance companies can be defined as limited-purpose insurance companies established with the specific purpose of financing risks emanating from their parent group or groups.