Risk-transfer mechanism that ensures full or partial financial compensation for the loss or damage caused by event(s) beyond the control of the insured party. Under an insurance contract, a party (the insurer) indemnifies the other party (the insured) against a specified amount of loss, occurring from specified eventualities within a specified period, provided a fee called premium is paid. In general insurance, compensation is normally proportionate to the loss incurred, whereas in life insurance usually a fixed sum is paid.
Some types of insurance (such as product liability insurance) are an essential component of risk management, and are mandatory in several countries. Insurance, however, provides protection only against tangible losses. It cannot ensure continuity of business, market share, or customer confidence, and cannot provide knowledge, skills, or resources to resume the operations after a disaster.

Use insurance in a sentence

  • It is good to have insurance against some of the bigger problems your business could face to avoid total disaster if they arise.

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  • When the tornado destroyed our house, the insurance that we had purchased enabled us to rebuild immediately, as well as provided us with temporary housing assistance.

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  • Bob seemed to think his expensive new auto insurance policy was an excuse to drive recklessly and risk an accident, but he was clearly headed for trouble.

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