General Insurance Concepts
Risk and its cousins
Insurance handles pure risk (loss or no loss) - never speculative risk (loss, gain, or no change), which is why gambling and stock investing are uninsurable. A peril is the cause of loss (fire, illness, death); a hazard increases the chance or severity of loss: physical (icy road), moral (fraud, arson), morale (carelessness because coverage exists).
What makes a risk insurable
Many similar exposure units, accidental and measurable losses, calculable probability, affordable premium, and no catastrophic concentration. The law of large numbers lets actuaries predict aggregate losses; adverse selection - attracting only the worst risks - undermines that math.
Contract principles
Life and health policies are contracts of utmost good faith (duty to disclose material facts), adhesion (insurer drafts the terms), and aleatory (unequal exchange of value). Indemnity restores the insured to pre-loss condition; life insurance is a valued contract, not indemnity. Insurable interest must exist at inception. Subrogation lets an insurer pursue the at-fault party after paying. Representations are believed-true statements; warranties are guaranteed; concealment is silence about a material fact. Waiver is voluntary surrender of a known right; estoppel prevents reclaiming it.
Structure of the business
Stock insurers (shareholders) and mutual insurers (policyholders) differ in ownership; fraternal societies, reciprocals, and Lloyd's associations round out the field. Career agents represent one insurer; independents represent several; brokers represent buyers. Premium equals expected claims plus expenses, and life premiums also reflect assumed interest - the higher the interest assumption, the lower the premium.
Traps: mixing moral with morale hazard, calling life insurance indemnity, and confusing waiver with estoppel.
Rule of thumb: if the loss can produce a profit, it isn't insurable.