How Insurance Work?

Put plainly, how insurance works is that, if you would like to protect yourself from huge losses in case of say, a car accident, then you go to an insurance company, buy an insurance policy that will covered the losses of your car, in exchange for a periodic payment (called insurance premium) you keep making to the insurance company on monthly or yearly basis.

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Essentially, insurance refers to spreading out the risk of an event, among many parties, so that in the worst case, the losses suffered by any single insured party, is much less than the losses suffered if that party were not insured. Herein, insurance offers peace-of-mind to the parties buying the insurance.