The insurance contract often called a policy. The person or company purchasing insurance coverage is called the insured, or the policy holder. The company issuing the insurance policy is called the insurer, or the insurance company. To be an enforceable agreement, a contract of insurance must contain the essential elements of contract: offer and acceptance, consideration, legal purpose, competent parties and legal forms.

Insurance offer and acceptance: The offer is customarily made by the prospective insured when he or she makes application for the desired coverage. The acceptance occurs, when the insurance company issues a policy. The consideration exchanged in an insurance transaction are the payment of the premium by the insured or other responsible party, and the promise of the insurer to pay if the coverage continuously occurs. In order to make insurance contract enforceable, the insurance contract must have a legal purpose. The most important application of the requirement of a legal contract is the insurable interest. If no insurable interest exists, the insurance contract will be void, and no benefits are payable under the insurance policy.

Life Insurance: A contract of life insurance typically provides that the insurer will pay a specified sum of money - the face amount of policy upon the death of the insured if the premiums have been paid in accordance with the terms of the life insurance contract. There are generally three types of life insurance policies: whole life, term insurance and endowment insurance.

Health Insurance: Health insurance policies are available for both individuals and to employees as a group under a company sponsored health plan. Health insurance has two basic types: income replacement and medical expense insurance.

Property Insurance: Property insurance protect against financial loss due to the damage to or destruction of the covered property.

Liability insurance: protects against the risk of legal action for damages that may be brought against the policyholder.

Auto insurance: The automobile owner must transfer the risk to a professional risk bearer by purchasing auto insurance of the various kinds and in the amounts of coverage that fits his/her needs.