Insurance is defined as the action process, or means of insuring or the state of being insured usually against loss or damage by a contingent event as fire, automobile crash or any other kind accident. For those of us who work with insurance that is a clear definition, for those who don't, it can be confusing.
Basically when someone purchases insurance they are transfering their exposure to risks such as fire, etc. to a large group of people that also have done the same. This community of people all pay money in the form of premiums to the insurance company and when one person has a loss or accident the company pays for that claim. If an insured has a claim their insurance may go up in price as they have used some of that money collected from the community while others haven't used any.
People will have accidents, but it is unlikely that everyone will. All of the people who buy insurance from a specific company share the loss by some of everyone's money pays for losses. They "Share the Risk." This is how companies can afford to charge people a few hundred dollars to insure a car and pay thousands to replace it if the vehicle is ruined in a accident.
