How does insurance work?
A very basic definition of insurance and how it works is it is an arrangement in which those who have potential risks will pay premiums to an insurance company who in return will pay out for losses specified in the insurance policy contract. There are many types of insurance available home, health, life, worker’s compensation and auto insurance to name the most common forms that individuals (and companies) use. Another definition of Insurance, as found in our Learning Center, is a system in which groups of people who have similar chances of suffering a loss transfer their risk of loss to an insurer who pools the risk of many people together. In exchange for payment of premium, the insurer promises to reimburse the person for their covered losses. Knowing the definition of insurance helps you to understand that how it works which is that it is a system that is designed to protect the policyholder (insured) against losses. Auto insurance is no different, it is there to protect your asset
