There are no certainties or guarantees in life. There is no guarantee that the business will not suffer an unexpected loss or damages. So while we cannot protect our interests against all risks, we can opt for some insurance. Let us take a look at concepts of insurance and functions of an insurance company.

An entity which provides insurance is known as an insurer, insurance company, insurance carrier. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an  insurable interest established by ownership, possession, or pre-existing relationship.