Insurance is a financial arrangement that protects against potential losses or risks. Individuals or businesses pay premiums to an insurer, who agrees to compensate for specific damages, losses, or liabilities, such as accidents, health issues, property damage, or death. It works by pooling risks among many policyholders, allowing the insurer to cover claims using collected premiums. Common types include health, auto, home, and life insurance. Policies outline coverage details, limits, and exclusions. Insurance promotes financial stability, peace of mind, and risk management, but requires careful consideration of costs, coverage, and terms to ensure adequate protection.