| Insurance, in law and economics, is a form of risk | | | | Definite Loss. The event that gives rise to the loss |
| management primarily used to hedge against the risk | | | | that is subject to insurance should, at least in |
| of a contingent loss. Insurance is defined as the | | | | principle, take place at a known time, in a known |
| equitable transfer of the risk of a loss, from one | | | | place, and from a known cause. The classic example |
| entity to another, in exchange for a premium. | | | | is death of an insured person on a life insurance |
| An insurer is a company selling the insurance. The | | | | policy. Fire, automobile accidents, and worker injuries |
| insurance rate is a factor used to determine the | | | | may all easily meet this criterion. Other types of |
| amount, called the premium, to be charged for a | | | | losses may only be definite in theory. Occupational |
| certain amount of insurance coverage. Risk | | | | disease, for instance, may involve prolonged |
| management, the practice of appraising and | | | | exposure to injurious conditions where no specific |
| controlling risk, has evolved as a discrete field of | | | | time, place or cause is identifiable. Ideally, the time, |
| study and practice. | | | | place and cause of a loss should be clear enough that |
| Commercially insurable risks typically share | | | | a reasonable person, with sufficient information, could |
| fourcommon characteristics | | | | objectively verify all three elements. |