Definition of "Insurance"

A legal contract between the insured and the insurer that transfers a specified covered risk to the insurer in exchange for a premium (also known as consideration). The details of cover will be specified within the policy documents or policy schedule.

Contractual means of shifting the burden of pure risks through pooling to minimize financial loss. Individuals and businesses therefor pay premiums to insurance companies in exchange for the reimbursement in the event of loss.