How does the insurance system works?

Insurance is a risk transfer system in which the persons who are exposed to the same type of risk are used to cover the losses of those who are actually damaged only by the realization of that risk from the premium pool created by paying a certain amount of money. Thanks to the insurance system, people share their losses, which can be measured by money, from the dangers they face through relatively small amounts of premiums they have paid.

In insurance, individuals actually share the damages they cannot afford by themselves through an organization. This organization consists of “insurance company”, “insurer” and “insurance contract”. Insurance company is a company that provides and sells insurance. Insurer is a person or company that underwrites an insurance risk; the party in an insurance contract undertaking to pay compensation. Insurance policy is a contract between the insurer and the insured, known as the policy holder, which determines the claims which the insurer is legally required to pay.

On next page you can see How do car insurances work?

Car crash in 2018

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