What is Insurance: Definition and 43 Discussions

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.
An entity which provides insurance is known as an insurer, an insurance company, an insurance carrier or an underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known - relatively small - loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship.
The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insurer will compensate the insured. The amount of money charged by the insurer to the policyholder for the coverage set forth in the insurance policy is called the premium. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. A mandatory out-of-pocket expense required by an insurance policy before an insurer will pay a claim is called a deductible (or if required by a health insurance policy, a copayment). The insurer may hedge its own risk by taking out reinsurance, whereby another insurance company agrees to carry some of the risks, especially if the primary insurer deems the risk too large for it to carry.

View More On Wikipedia.org
  1. kyphysics

    Is "Umbrella" Insurance Worth it for "Average Joe" American?

    Umbrella insurance means that which is above "normal" policy limits. Ex., you get an extra $1M in coverage against liabilities. It's surprisingly not that much more money - maybe $100-$200 more per year ($10-$20 extra/month) on top of a normal insurance policy. It would cover your home and...
  2. Leo Liu

    Discussing Insurance, Risk Tolerance and Game Theory

    The title is my question, and this post is meant to be a place for discussions. I think it is somewhat related to game theory and microeconomics, but I am not sure how to accurately categorize it. Let me give you an example. Let us suppose that Mr. Goose, an ideal person with a national average...
  3. K

    What are the probabilities involved with package shipping insurance?

    The situation is, I purchase an insurance for loss of a package during shipment, the insurance fee is 0.5% of the claimed actual value of the package, but this is optional, you don't need to purchase insurance but you will not get compensated if the package is lost.. Assume that the shipping...
  4. J

    MHB Probability of 4 Adults Having Health Insurance

    66% of adults have health insurance, what is the probability that 4 adults selected at random have health insurance?
  5. J

    MHB Calculating Probability of Filing >3 Claims Under Insurance Policy

    Under an insurance policy, a maximum of of 5 claims may be filed per year by a policy holder. Let p(n) be the probability that a policyholder files n claims during a given year, where n= 0,1,2,3,4,5. An actuary makes the following observations: 1) p (n) >= p (n+1) for 0<=n <=4 2) the...
  6. EnumaElish

    Can there be insurance for data loss due to EMP

    If an insurer were to offer a policy against data loss from a catastrophic event such as an electromagnetic pulse, the insurer would be in no position to pay when the contingency occurs, the reason being that all of his own bank account will have been wiped clean by the same EMP. Therefore I...
  7. M

    Probability insurance company problem

    Homework Statement (4) (a) Let X be a random variable defined by the probability mass function P(X = x). The possible values X can take (denoted x) and the probability of those values occurring P(X = x) can be seen below x 0 1000 2000 5000 P(X = x) 0.94 0.03 0.02 0.01 Find E(X). (b) An...
  8. M

    Probability insurance company

    Homework Statement (4) (a) Let X be a random variable defined by the probability mass function P(X = x). The possible values X can take (denoted x) and the probability of those values occurring P(X = x) can be seen below x 0 1000 2000 5000 P(X = x) 0.94 0.03 0.02 0.01 Find E(X). (b) An...
  9. B

    Insurance claim with normal approximation

    Homework Statement There are ##N = 10000## clients of an insurance company. One-half of them will file claims with probability ##p_1 = .05##, another half of them will file claims with probability ##p_2 = .03##. Each claim is worth ##$1000##. Find the Value-at-Risk at the level α = 0.99, that...
  10. D

    Buying a car based on cost of insurance?

    I know there are a lot of parameters involved when insurance companies determine how much they'll charge you, and most are beyond my present control (Age, Driving History, Location etc...), but the most important parameter is the type of car you're looking to insure. I'm hoping to buy a car...
  11. S

    Got rear-ended, insurance co offers me settlement. What to do?

    Its that time of my life again, where I conjure up the expertise of PF! I was not to seriously injured in the accident, to put that issue way right off the bat. (I am okay. And so is everyone who was involved.) Except the little inconvenient, nagging, pestering, sensation in my lower back...
  12. A

    Insurance Jobs for Physics PhDs: Where to look?

    I'll be finishing my Physics PhD in about six months, and I am looking to leave Physics for jobs in consulting, finance, or at an insurance company. There's been plenty written here about finance jobs, but not as much about the other two, despite them appearing to be some of the major outlets...
  13. Y

    Auto Insurance monthly interest rate. Having trouble

    [b]1. If you took out a $11,250 car loan at 3.840 % for 5 yrs (60 months), (a) what would be the monthly payment? (b) what is the difference between paying the $11,250 up front versus taking a loan out for it? [b]2. Interest formula: I= P r T [b]3. (a) I= (11,250)(.03840)(5)...
  14. D

    News Canadian going on a ski trip to the US - Need insurance

    Hi there, I was wondering if anyone on this forum knows anything about attaining insurance while going to the US. Since I will be skiing (that could be considered a dangerous activity), is there a more comprehensive insurance package that I will need? Also, what role do pre-existing...
  15. S

    Lumped capacitance model if you insure the interior is well mixed?

    Hi everybody. I have been doing some experimental heat loss calculations on a sealed cube of fluid, filling the volume of the cube with hot water then sitting it in a larger tank of fluid at a fixed cooler temperature and monitoring the drop of temperature inside the box. I have also positioned...
  16. T

    Physics What does an applied mathematician/physicist do in a bank/insurer?

    Hello, if I take a master's degree in mathematical finance, what would I do exactly in a bank? And what about in an insurer? Would I be making mathematical models? Don't banks and insurers already have the mathematical models they need?
  17. I

    Monte Carlo Sims - Strange life insurance policy

    Homework Statement 5 people of ages (30M, 32M, 37F, 40M, 42F) enter into a life insurance contract where the one that outlives the others, receives a one time benefit of $1M, at the time of the penultimate death. What are the fair premiums (different), for each policy member? Homework...
  18. Math Is Hard

    Health insurance for a contractor

    I'm being recruited for a job that I think I would really enjoy. The only problem is that they will hire this person as an independent contractor first, until they have budget and HR approval to bring this person on board as a career employee. The pay is good, but I worry about being able to...
  19. sophiecentaur

    Medical Our genes, medical insurance and tax.

    Any insurance is, essentially, a gamble. Someone (a company) with more money than us is prepared to gamble, offering a huge stake (the payout) against our small stake (the premium). The Insurer works out the probability of a payout and calculates the premium that they want so that they make a...
  20. H

    Is school or work the next step towards becoming a great inventor?

    I am interested in researching about high energy physics such as Beyond the standard model, symmetry breaking and origin of mass, electroweak, CP violation,... So I want to join groups that have been researching above problems by I will be gotten anyone part of group's project and then i will...
  21. S

    Describe costs and benefits to society from purchasing insurance.

    Describe costs and benefits to society from purchasing insurance.
  22. EnumaElish

    Pet Insurance Questions: Buy, Use or Avoid?

    We have regular health insurance for our cat, who also wears a microchip for identification. Recently I've contacted his microchip co. for some reason, and they attempted to sell me emergency insurance -- they said if the pet is ever lost, it will cover any expenses between the time it's...
  23. W

    News The Federal Insurance Office

    The House wants to expand the size of Government again. I find it very interesting that the Federal Insurance Office would not oversee health insurance. I thought they were trying to reform health insurance? http://www.insurancejournal.com/news.../02/104254.htm [Broken] "House Panel...
  24. Ivan Seeking

    How for-profit insurers hijacked the health care system

  25. A

    Health insurance , what to do

    OK, so I have Blue Cross Blue Shield Federal Employees Program, but have never used it. So I don't have a clue of what all the jargon means and what to do. I recently got sick, so had to go to the hospital. The Dr. charged a co-payment of $20, and then sent me to the clinic for "services"...
  26. Topher925

    Dental Insurance or Dental Plan? Need Help.

    I need some advice about dental care. The one thing I don't like about being a grad student is I don't have any money. I lost my dental insurance a couple months ago and need to see a dentist. The problem is I have no coverage and of course no money. My school does not off any kind of dental...
  27. rocomath

    Need help Policy Number? Insurance

    Need help! Policy Number? Insurance ... Ok, I have my card infront of me. I have: subscriber id, group number, payer id, and card number ... but not "Policy Number" Which is it? Thanks!
  28. B

    Question about car insurance

    Does it always increase when you get a ticket. I got a ticket for failing to stop at a stop sign , but I had the right of way because I arrived at the stop sign first but I before the other three cars as I turned right. What should I do to prevent my (or I should say parents') car insurance...
  29. C

    Insurance is a subject mater of solicitation

    All insurance ads have this line "Insurance is a subject mater of solicitation". What do they mean?
  30. R

    Shopping around for my health insurance

    We are shopping around for my health insurance and I'm hoping I can get opinions from everybody here about which ones to avoid and which ones you have had a good experience with. Thanks in advance
  31. Ivan Seeking

    News Insurance companies refusing N.E. US homeowners

    http://www.post-gazette.com/pg/06082/675468.stm [Broken] It strikes me that we might see a great deal of wealth simply evaporate. If in areas once prized for their millions+ dollar homes, the land is suddenly considered too risky to insure, then the wealth simply disappears? This seems...
  32. Q

    Stupid insurance companies

    Well I'm 17, and my car insurance billf or full coverage is around 260 dollars a month. I cannot afford this. I have no job, and my parents are paying for my car insurance now, they said that if I get a job I could pay for it, but they will not let me do it since it is so expensive (its...
  33. mattmns

    Considering not getting car insurance

    I currently ride my bike to the bus stop and then ride to school on the bus, but lately it has been getting extremely cold, and I have been considering getting a cheap car and driving to the bus stop and going from there. The question I have though is about car insurance. I am 20, not married...
  34. Clausius2

    Your car expenditures and insurance

    I would really want to know how much do you spend each year in your car and in your insurance, including gasoline, repairs, fines, and so on. Please detail what kind of car and what kind of insurance. This data could avoid me to buy a car in US, or to buy it indeed. THANK YOU VERY MUCH!
  35. S

    Probability and insurance

    Hello all I found this question rather interesting and very confusing, check it out an insurance company classifies its customers as either high risk 5% of people, medium risk 25% of people, and low risk 70% of people. now the probability of a high risk customer making a claim in the first...
  36. O

    US health insurance too complicated ?

    I may have to go to the US for a period of 3 months to 2 years. I want to buy my own health insurance because either I work on my own or not at all or in modest paying jobs that don't offer health insurance. How much would it cost me to buy my own in the US ? I saw a documentary explaining...
  37. Ivan Seeking

    News Insurer warns of global warming catastrophe

  38. Monique

    News Insurance for delivering babies costs so much, the doctor can’t practice

    http://msnbc.msn.com/Default.aspx?id=3660762&p1=0" [Broken] "malpractice premiums that soared from $12,000 in 2000 to $57,000 in 2003" "Anything less than perfection is malpractice" It is a shame..
  39. Ivan Seeking

    Auto Accidents Rise 14% During Full Moon, U.K. Insurer Says: Bloomberg.com

    "Aug. 11 (Bloomberg) -- Car accidents occur 14 percent more often on average during a full moon than a new moon, according to a study of 3 million car policies by the U.K.'s Churchill Insurance Group Plc." http://quote.bloomberg.com/apps/news?pid=10000102&sid=aFPQNod4LRn4&refer=uk [Broken]...
  40. turbo

    News Maine Health Professionals Working to Provide Affordable Insurance

    I spoke to my younger sister yesterday, and she is really upset about the GOP nay-sayers that are trying to kill the ACA. She is a health educator, and she is working with several regional health providers to enlist poor and elderly people into one of Maine's two participating insurances...
  41. howru1

    MHB Contingent payment-actuaries, math whiz, insurance expert, others-all welcome

    How to fairly divide the contingent payout of \$25,000 (sum insured/face value) as part of total insurance payout \$35,913.33 (balance was from dividends and bonuses)? 1. A paid 8 yearly premium @\$348.25/year (total=\$2,786) inclusive for a relative C(the life insured person). 2. A's...
  42. R

    Poisson distribution for insurance

    Homework Statement An insurer uses the Poisson distribution with mean 4 as the model for the number of warranty claims per month on a particular product. Each warranty claim results in a payment of 2 by the insurer. Find the probability that the total payment by the insurer in a given...
  43. Borek

    Uncovering the Health Care & Insurance Industry Relationship

    Seen somewhere else: Any comments? Does it really look this way?