Risk, or a chance of loss, is a basic characteristic of life as mentioned in the above quote. The Random House dictionary defines insurance as follows:
The act, system or business of insuring property, life, one's person, etc. against loss or harm, in consideration of a payment proportionate to the risk involved. Coverage by contract in which one party agrees to indemnify (make whole) another for any loss that occurs under the term of the contract.
Insurance is a social device that protects people and businesses against certain types of losses by transferring risk from individuals to a group. It involves the pooling of a large number of individual risks.
A loss is any reduction in the quality, quantity or value of something. Under various insurance policies, loss can mean death, bodily injury, disease, property damage, physical disappearance of property, lost income, incurred expenses or a reduction in the quality of life.
The cause of loss covered under an insurance contract is called peril. Some examples of perils are fire, theft, automobile accidents, earthquakes, flood or illness. The insurance contract between the client and the company will define what perils are or are not covered within the terms of the contract.
