Insurance is a defensive measure used against future conditional losses to hedge the possible risks of the future. It is a legal contract that protects a person from contingent risk of losses through financial means and provides a means for individuals and societies to handle some of the risks faced in daily life.

These contracts of insurance are called policies and are provided by insurance companies. The Insurance companies charge a regular amount from the customers, which is paid back, either in part, or entirety, to the customers in case of a definite loss. This regular amount charged from customers is called Insurance Premium.