Insurance, as implied in Risk Management studies, is a form of transferring risk associated with a particular asset to another party, usually an insurer, in exchange for a sum of money called 'premium' - determined by an 'Insurance rate' which is a factor depending on the amount of risk involved, so as to be able to compensate for any loss to that particular asset due to unforeseen contingencies in the future.

An individual  or entity seeking to take an Insurance policy -  essentially called as such, when two parties enter into a contract bound by the promise made by the 'Insurer' - The entity to which the risk is being transferred to- to the 'Insured'  - The party who is covered against possible risk - that the insured can take out a 'claim' - A sum of money equal to the asset loss that has occured, assuming that all the necessary terms and conditions are met by both the sides that have signed the contract. By this, the Insured is said to be 'Indemnified' against the possible risk by the 'Insurer'. The policy herein has some basic elements stated explicitly such as the details of the Insurer, the Insured, the term of validity, the premium to be paid, the Sum Assured -  the claimable amount which has been deemed as equal to the monetary value of the underlying asset, and all possible exclusions - the events that are not covered or are not considered as losses to be set off with the Insurance coverage.

Insurance in its most elementary and basic form can be understood as a tool using which people help each other when exposed to the same risk.  For example, a village with a few houses with tatched roofs and is geographically situated close to the equator is probably exposed to intense heat from the sun and there is an inherent risk of any one of those houses catching fire. It so happens that each house owner is aware of the risk he is exposed to and hence contributes to a common pool of money with contributions from every householder in the village. Now,if and when the expected risk event happens, the loss incurring house owner takes out as much money he is entitled to take (The value of the house, in this case!)

With Insurance, the statistical probability of being exposed to the same amount of risk and the ability to guage the graveness of the risk involved comes from the fact that a large number of people are all exposed to the same risk, in one way or the other. One example of modern day example would be a Car Insurance - wherein, if you took just the U.S data, over 200 million vehciles are insured, all of which are exposed to the same risk on the roads. This might be the same world wide, with almost all countries, exposed to the same risk with varying levels of intensity.