Insurance is a means of protection against financial losses. It is a form of risk management primarily used to hedge against the risk of contingent and uncertain loss. An entity that provides insurance is known as an insurer, insurance company or insurer. A person or entity that buys insurance is known as insured or insured. The insurance operation implies that the insured assumes a relatively small and guaranteed loss in the form of payment to the insurer in exchange for the insurer's undertaking to compensate the insured in the event of a covered loss. The loss may or may not be financial, but must be reducible to financial terms, and must involve something in which the insured has an insurable interest established by the property, possession, or pre-existing relationship.
The insured receives a contract, called an insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. The amount of money charged by the insurer to the insured for the coverage established in the insurance policy is called the premium. If the insured experiences a loss potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster.