The Definition of Conventional Insurance

Terminologically, insurance is contract made by a company or society, or by a state, to provide a guarantee of compensation for loss, damage, sickness, death, etc in return for regular payment .
According to Fuad Mohd Fachruddin the commercial insurance is a contract between two parties, insured and insurer, with the policy, the insurer receives the premium; it’s one of the regular sum of paid, in cash or credit, from the insured and the insurer promises to indemnify all of losses may be suffered him .
Afzalur Rahman provided the similar definition with Fuad Mohd Fakhruddin; he defined the insurance as a contract whereby one person, called the insurer, undertakes, in return for agreed consideration, called the premium to pay to another person, called the insured, a sum of money, or its equivalent, on the happening of a specified event . The specified event must have some element of uncertainty about it; the uncertainty may be either as the case of life insurance, in the fact that, although the event is bound to happen in the ordinary course of nature, the time of its happening is uncertain, or in the fact that the happening of the event depends upon accidental causes, and the event, therefore, may never happen at all.
Willet, Kulp, Riegel, Miller and Peffer, all provide similar definition that insurance is the concept of risk pooling-of group sharing of losses. That is, persons exposed to loss from a particular source combine their risk and agree to share losses on some equitable basis .
Thus, in very simple word, a contract of insurance is a contract between two parties, the insurer and the insured, the former promises to compensate the latter on the happening of a definite event in return for his contribution.
Based on some ideas of economic experts toward the definition of insurance above, it can be concluded that an insurance agreement involves five essential conditions:
a. There must be a contract of insurance between the parties,
b. The event should involve some amount of uncertainty,
c. There must be contract for the payment of some amount of money, or some benefit which becomes payable to the insured person on the happening of an event,
d. Compensation is promised by the insurer in return for the payment of contributions of premiums by the insured,
e. The event must be against the interest of the insured.