Insurance allows individuals and businesses to transfer the financial risk of certain events, such as accidents, natural disasters, health issues, or theft, to an insurance company. In return, they pay regular premiums to the insurer.

An insurance policy is a legal contract that outlines the terms and conditions of the coverage. It specifies what is covered, what is excluded, the premium amount, and the duration of coverage.

Policyholders pay premiums, typically on a monthly or annual basis, to maintain their insurance coverage. The amount of the premium is based on factors such as the level of coverage, the policyholder's risk profile, and the insurer's pricing strategy.

In many insurance policies, there is a deductible, which is the amount the policyholder must pay out of pocket before the insurance coverage kicks in.