Insurance is a financial mechanism designed to mitigate risks by transferring them from individuals or entities to an insurance company in exchange for premium payments.

Insurance policies are contracts between the insurer and the insured, outlining the terms, conditions, and coverage limits. Policies specify the premiums, deductibles, coverage limits, and exclusions. Insurers assess risks and determine premiums based on factors such as age, health status, driving record, and the value of insured assets.

Premiums are periodic payments made by the insured to the insurance company in exchange for coverage. Deductibles are the out-of-pocket expenses the insured must pay before the insurance coverage kicks in. Higher deductibles typically result in lower premiums, while lower deductibles lead to higher premiums.