Function

• Insurance companies sell insurance policies that protect people from losses associated with specific unplanned events. If the unplanned events covered by the insurance policy occur, the insurance company will pay the person with the insurance policy a certain amount of money as set out in the rules of the plan. For instance, you could purchase an insurance policy for damages to your home and the insurance company pay for damages if the home was affected by a fire or other events covered by the plan.
  
  

Types

• Common types of insurance include health insurance, homeowner's insurance, auto insurance, and rental insurance. Health insurance covers expenses related health care costs, auto insurance covers costs related to car accidents and damage to a vehicle while rental insurance covers costs related to property damage in a rented home or apartment.
  
  

Considerations

• The cost of insurance policies are based, in part, on the likelihood that financial expenses or damages will occur that will require the insurance company to pay money and the amount of the damages and expenses. For instance, drivers with cheap cars and good driving records will typically pay less for auto insurance than those with expensive cars and poor driving records.