Insurance systems are structured frameworks that help individuals and businesses manage risk by providing financial protection against potential losses. These systems operate by pooling resources from many policyholders, allowing them to share the costs of unexpected events, such as accidents, illnesses, or property damage. In an insurance system, policyholders pay regular premiums to an insurance company, which in return promises to cover specific losses as outlined in the insurance policy. This arrangement helps ensure that individuals can recover financially from unforeseen circumstances, promoting stability and peace of mind in their lives and businesses.