'Insurance', in law and economics, is a form of risk management primarily used
to hedge against the risk of a contingent loss. Insurance is defined as the
equitable transfer of the risk of a loss, from one entity to another, in
exchange for a premium, and can be thought of as a guaranteed small loss to
prevent a large, possibly devastating loss. An 'insurer' is a company selling
the insurance; an 'insured' or 'policyholder' is the person or entity buying the
insurance. The ' insurance rate' is a factor used to determine the amount to be
charged for a certain amount of insurance coverage, called the 'premium'. Risk
management, the practice of appraising and controlling risk, has evolved as a
discrete field of study and practice.
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