Final answer:
Insurance is a financial protection method where individuals pay premiums to cover potential financial losses from specific events. Different types of insurance like health, car, home, and life insurance safeguard against various risks.
Explanation:
Insurance is a method that households and firms use to prevent any single event from having a significant detrimental financial effect. Policyholders pay regular premiums to an insurance company, which then compensates group members who suffer financial damage from covered events.
By diversifying risk across a pool of policyholders, insurance companies can manage and reduce the impact of individual risks. Health insurance, car insurance, home insurance, and life insurance are common types of insurance that protect against various risks.
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