What "insurance" means in finance

Insurance is a contract between an individual or entity (the insured) and an insurance company (the insurer), in which the insured pays a premium to the insurer in exchange for financial protection against specified risks or losses. Insurance provides protection from unforeseen events, such as accidents, illnesses, natural disasters, theft, and other risks that may result in financial loss. The insurer agrees to pay the insured a specified amount in the event of a loss, subject to the terms and conditions of the insurance policy. Insurance can be purchased for personal, business, and other purposes to manage risk and provide financial security.