Insurance provides protection against the loss or damage and it can be applied to a person or an item. Insurance is typically provided a company that pools the money from many people to pay for the losses of the few who need it. In this way, insurance is a way of reducing your individual loss by spreading the risk over many people. Insurance companies collect payment over time in the form of premiums and provide the details of coverage in a formal document called a policy. The policy acts as a contract between the person and the Insurance Company where the person promises to pay the premium and the company promises to repair or replace the lost or damaged item.

It is possible to obtain insurance coverage for almost anything, but the most common insurance policies issued today are automobile and homeowners insurance. Many people also have life and health insurance.