Define insurance.

Insurance is a contractual arrangement between an individual or entity (the insured) and an insurance company (the insurer) designed to protect against financial losses arising from uncertain future events. It operates on the principle of risk sharing, where the insurer pools premiums from multiple policyholders to cover the losses of a few. The core elements include:

• Premium: Periodic payment by the insured to the insurer.
• Policy: The legal document outlining terms, coverage, and exclusions.
• Indemnity: Compensation limited to the actual loss incurred (not speculative gains).
• Utmost Good Faith: Requires full disclosure of relevant facts by both parties.

Insurance mitigates risks by transferring financial responsibility, ensuring stability for individuals, businesses, and economies. It encompasses diverse forms such as life, health, property, and liability insurance, each tailored to specific needs.