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Life & Health · Chapter 1 · Industry Basics

Insurance

Definition
The transfer of risk from one party to another through the pooling of funds (premiums), in exchange for premium payments.
In plain English
Everyone chips into a shared pot; the unlucky few who suffer a loss get paid from it. You trade a small certain cost (premium) for protection against a large uncertain one.
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Verified against primary sources · 2026-08-10