In return for your premiums, the insurance Quotes Chimp agrees to accept your risk of loss within the subject matter of the insurance policy (auto, life, health, etc.), in the statistically unlikely event that a loss is incurred. The potential loss to the insurance company from an incident covered by the policy is much higher than the fixed loss of your premium. Thus, you are trading a small but defined loss in order to get the insurance company to absorb an unknown but potentially larger future loss. This agreement is formalized in a written contract.