Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss.

Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium and duty of care. It is asystem whereby individuals or companies apprehensive about property loss or damage make payments in the form of premiums to an insurance company, who pays an agreed upon sum to the insured in the event of loss.