Skip to main content

Career Resources — Insurance

Industry Overview

Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment.

An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

While most people think of insurance as a consumer product, businesses also need insurance for a variety of reasons, but mostly to protect their assets in the event of lawsuits, disasters, thefts, and so on. Thus insurance can be divided into two primary types: individual or personal policies and commercial or business policies. Once this categorization has occurred, they can be divided further into four additional types of insurance:

  1. Health insurance: Covers expenses in the event of illness, hospitalization, etc. Individuals can purchase their own policies, and companies provide health insurance benefits for their employees.
  2. Life insurance: Pays benefits to a designated beneficiary when the policyholder dies. Like health insurance, life insurance is purchased by both individuals for personal use and by businesses as a benefit to their employees.
  3. Liability insurance: Protects individuals and businesses in the event of a law suit, and other specific insurances, such as executive insurance.
  4. Property insurance: Insures properties such as homes, cars, boats, and business buildings and inventory.