Insurance

Insurance, method of financial protection by which one party undertakes to indemnify another against certain forms of loss. An insurance company pools the payments for this service and invests them to earn further funds. Each insured person pays a relatively small amount, the premium, for a stated period of coverage. In return the company will, subject to an assessment of a claim, reimburse the insured for loss caused by an event covered in the policy. Forms of insurance have existed since the earliest civilizations. Modern insurance began with the medieval guilds, which sometimes insured members against trade losses. The specialized fields of fire and maritime insurance developed in the 17th and 18th centuries. The development of probability theory allowed the statistical likelihood of damage to be calculated, making insurance as a business possible.