Insurance definition
/What is Insurance?
Insurance is a contractual agreement under which the insured party promises to pay the insurer a periodic amount in exchange for a payout in the event of a future loss. If such a loss occurs, the insured party may be required to retain a portion of the loss (known as a deductible), while the insurer pays the remaining amount. Insurance is used as a risk mitigation tactic by individuals and businesses. Certain types of insurance are required, depending on the laws of the governing jurisdiction.
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Advantages of Insurance
A business can offload some risk to a third party by purchasing insurance. This allows it to mitigate the risk associated with operating in a particular market. By having insurance, a firm can reduce the swings in its reported income that might otherwise come from absorbing losses from insurable events. The use of insurance is also preferred by investors, who have less at risk when they invest in a fully insured firm.
Types of Insurance
There are many types of insurance, including the following:
Automobile insurance
Business interruption insurance
Crop insurance
Disability insurance
Errors and omissions insurance
Liability insurance
Life insurance
Medical insurance
Product liability insurance
Professional liability insurance
Property insurance
Workers' compensation insurance
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