Insurance is defined as the equitable transfer of the risk of a loss from one entity to another in exchange for payment. The insurance rate is a factor used to determine the amount to be changed for a certain amount of insurance coverage called the premium.

Insurance involves pooling funds from many insured entities to pay for the losses that some many incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the occurring. Insurance can have various effects on society through the way that it changes who bears the cost of losses and damage.

Insurance can influence the probability of losses through moral hazard, insurance fraud, and preventive steps by the insurance company. Anyone who owns an asset can buy insurance to protect it against losses due to fire or theft and so on. Each one of us can insure our and our dependents, health and well being through hospitalisation and personal accident policies.

Insurance is away of protecting against these financial losses. For a payment (premium) an insurance company will take the responsibility of compensating your financial losses. We face a lot of risks in our daily lives, some of these lead to financial losses, that one of the main reasons one should insure to protect one's belongings and assets against financial loss.