The Smart Investors

The concept in insurance is based on an individual or a company paying premiums to an insurance firm. The insurer in turn will accept to cover some losses or damages as agreed in the policy to help guard against financial losses when there is unforeseen incident.

Well, it's like depositing money in a common pool, and when one incurs losses, (s)he gets money out of this pool. That is just the logical explanation I can give.

First of all, you need to read and digest the details of the insurance policy you want to buy, what it covers, what it does not cover to learn how it works.

It is all about having a contract with an insurance company that agrees to compensate you or return you to your former position before the occurrence of a loss. Your own part is to make a periodic payment called premium. Insurance companies invest the premiums they collect so that they can have enough money to compensate their policy holders if losses occur.