Here’s Merriam-Webster’s definition:

An agreement in which a person makes regular payments to a company and the company promises to pay money if the person is injured or dies, or to pay money equal to the value of something (such as a house or car) if it is damaged, lost, or stolen.

But we think we can do better:

Insurance* (noun) (*This Definition Written In Plain English): A deal between you and a company: You pay them a set monthly amount. In return, the company promises to pay for possible future damage, injury, or loss. In other words, because you know the unpleasant-but-undeniable stats about accidents (more on that in a minute), you pay a small chunk each month to cover them, instead of paying for the whole thing after the fact.

Insurance folks talk a lot about risk. The fact is, walking out your front door is a bold move. And for drivers, dangers lurk at every (literal) turn. Car insurance industry experts estimate that you’ll file one claim every 17.9 years or so—that adds up to an average of three or four accidents over a lifetime. Think about that. Not one, not even two. If you know you’ll almost certainly have a wreck, doesn’t it make sense to protect yourself?

That’s exactly what auto insurance does. Instead of you having to pay for the damages from a wreck or act of nature (hello, hail!) out of your stylish-but-not-super-deep pockets, your insurance company does. How can they manage this? They ‘assume’, or take on, your risk, along with a bunch of other folks, too. Your monthly payment (or premium) goes into a pool with a lot of other premiums, and when a wreck happens and the money shark comes calling, the company can then pull out however many premium-fish are necessary to keep him satisfied—and keep him from tearing your arm off.