{"id":352628,"date":"2017-06-02T15:27:30","date_gmt":"2017-06-02T20:27:30","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/consumer\/insurance\/what-is-insurance.html"},"modified":"2024-05-03T10:51:56","modified_gmt":"2024-05-03T15:51:56","slug":"what-is-insurance","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/consumer\/insurance\/what-is-insurance.html","title":{"rendered":"What Is Insurance?"},"content":{"rendered":"\n
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What Is Insurance?<\/h1>\n
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\n By Oni Harton, J.D.<\/a> | Legally reviewed by Melissa Bender, Esq.<\/a>\n | Last reviewed\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Insurance is an excellent way to manage financial risks. It’s a contract in which an insurer protects the policyholder from losses. Insurance<\/a> covers financial losses from accidents, injury, or property damage. It can also give financial protection for costs associated with liability for damage or injury caused to a third party.<\/p>\r\n

The types of insurance<\/a> policies available can cover all your needs. Insurance providers work to offer the types of coverage and insurance products that will meet consumer needs.<\/p>\r\n

Each state regulates the insurance industry within its borders. But what is insurance, and how does it work? This article offers an overview of insurance and how it works.<\/p>\r\n

What Is Insurance?<\/h2>\r\n

Insurance is a contract between you and your insurance company. The insurance company agrees to provide financial protection or reimbursement of losses from a covered event in exchange for premium payments and following the contract terms.<\/p>\r\n

You abide by the terms of the contract. The insurer covers costs associated with certain types of misfortune. Or the insurance company can shield you from certain types of liability.<\/p>\r\n

Categories of Insurance Benefits<\/h3>\r\n

There are two basic types of insurance benefits: indemnity<\/a> and liability. Some plans include both. Under an indemnity policy, the insurance company pays for certain losses or events, like death, illness, or damage to your house.<\/p>\r\n

A liability policy pays other people if you’re liable for their damages<\/a>. Liability coverage covers damages resulting from, for example, personal injury or property damage.<\/p>\r\n

Insurance plans are about more than just paying for specific losses. Under some policies, the insurance company agrees to provide your legal defense<\/a>. Insurance covers you if someone sues you, and you are liable for a sum of money in a settlement or a verdict. For example, under title insurance<\/a>, the insurance company will defend you against someone claiming they have an ownership interest in your new home.<\/p>\r\n

How Does Insurance Work?<\/h2>\r\n

Insurance has several essential parts that make the system work. These include the following:<\/p>\r\n