Insurance refers to the contract or legal agreement between two parties i.e. the insurance company (insurer) and the individual or entity (insured). It is represented by a policy, and is something by which the insured receives financial protection or reimbursement against losses from the insurance company. These events which cause these losses are often referred to as contingencies, because there is an uncertainty regarding their happening.
The insured pays a premium (often paid every month) in return for the promise to be careful. Usually, the insured receives compensation for their loss. However, if the insured was not careful, then the insurance company will not have to pay the money back.