And, the more property you own, the more likely you may one day be sued for liability. Insurance companies offer financial protection against such dangers and losses by promising to pay for a relatively large loss in return for the payment of a much smaller premium . Of course, the loss may or may not happen, but the insurance company's promise results in peace of mind. The definition of risk is the chance or possibility of financial loss. There are three basic types of risk for which you can purchase insurance protection.
Personal risk includes the chance of losses due to injuries, sickness, or death.
Property risk includes the damage or theft of your personal or real property, such as your automobile or house. Finally, the risk of liability includes the potential loss resulting from lawsuits that others might bring against you because of damage to them or their property for which you are responsible. Personal, property, and liability risks are defined as pure risks, or insurable risks. Pure risks are accidental and unintentional events for which the nature and financial cost of the loss can be predicted. A speculative risk carries a chance of either loss or gain.