What is insurance? Generally, it is a risk mitigation relationship
between an insured party and an insurer. The insured party is the individual who is
protected. They are mitigating the risk of suffering,
some sort of costs, damages, liability, etcetera, based on a specific type of occurrence. An insurer is the individual willing to or
accepting responsibility for indemnifying or holding the insured harmless in the event
that a certain occurrence occurs. So insurance comes back in any number of context
or situations but there are a couple of key concepts that you need to understand there. To start with, the concept of risk mitigation
and the purpose of insurance in that way, and then the protected individual, the insured
and then the individual doing the protecting that is the individual mitigating the risk
for the insured being the insurer. Other than that, you need to understand the
value that is exchange there. The insured will pay premiums to the insurer,
that is any form of value to the insurer in exchange for that insurer promising to indemnify
or again, hold harmless or cover any costs, damages, etcetera associated with a specific
type of occurrence. And this is memorialized in an insurance contract
or an insurance policy. Now, the key characteristics of that insurance
contract or policy are the potential risks that are covered and the limits of coverage. So the policy will identify a specific type
of risk. It can be the occurrence of any number of
types of events but it will specifically identify a range of coverage of specific contingencies,
things that could arise at some point in the future. After that, the extent to which it will cover,
indemnify or pay for any resulting damages suffered by the insured in the event that
that occurrence comes about. Now, just to give you some examples of some
occurrences, it could be that you wreck your vehicle. It could be that you suffer some kind of a
health ailment. So the policy provides coverage for any payments
or costs incurred for the treatment of that. It could be a policy in the event you commit
a professional malpractice. It could be a policy that prevents damage
to property. All of these are contingent events that could
potentially arise in the future. If they did, it would cause some form of risk
of harm so the insurer and the insured enter into this relationship. In the event this comes about, the insurer
will again pay or hold the insurer harmless up to a certain amount, the limits of coverage. As long as you have these key concepts then
this is the basis for what is insurance and the insurance relationship. http://TheBusinessProfessor.com