Insurance
Insurance is used to protect against contigent loss risk. It is primarily a method of managing
risk of loss, destruction, injury or other considerations of the item being insured. When
an item is insured by an insurance company, a premium is paid to the insuring entity for
absorbing the risk of loss from an individual that bought the insurance.
The money premium paid to the insurance company is considered to be a small loss sustained
to offset the possibility of a larger loss if no insurance was purchased. The premium is
typically determined by insurance rate, type of insurance coverage and the period of coverage.
Risk management can be classified as the practice of appraisal and control of risk of loss
to an insured item.
The determination of an insurance loss includes the loss taking place at a known time, from
a specific cause, and in a known place. Example of occurrences that meet these events are:
automobile accidents, fire, death and injury to a worker.
