Getting to know Insurance

Wikipedia defines insurance as a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent, uncertain loss.

A simple explanation is that all of us face risks in our day to day lives, and we would obviously want protection from those risks. For example, if I own a car, then whenever I drive there is an element of risk there in the form of damage occurring to the car due to accidents. The damage can occur due to other reasons as well, such as natural calamities or car theft. In the occurrence of an accident, the repair costs may run into several thousands. As an individual, I wish to have some protection and mitigate my risk. In other words, I want to insuremy car.

So what should I do? I go to a company which issues this insurance. These companies are called Insurance companies, and I have to buy a motor insurance from such a company. The company will collect a fee called premium from me, and in...