Insurance is a precaution against a possible unwanted outcome: in life and in business, it's a way of managing risk and keeping things on the move.
We use insurance to protect against the possibility of loss, usually financial. When we buy insurance, we transfer our risk to someone else in exchange for a payment or premium. Then, if we suffer a loss, insurance puts us back into a position pre-claim (reinstatement).
And if you think about it, nothing happens without insurance! We couldn't run businesses or drive cars, own homes or travel anywhere without it, because the potential risks would be too great. Insurance gives us the peace of mind and security we need to operate.
It works because insurance companies group together a large number of people who all feel exposed to the same possible circumstances. The company knows that, in any one year, the total premium collected from the group of people should cover the cost of the claims made by the unfortunate few who actually suffer a loss.