Final answer:
Renter's insurance covers personal possessions, borrowed items, and liability for injuries in a rented home. Premiums are paid to an insurance company, which offers compensation when a covered event occurs. Different types of insurance protect against various risks, providing financial security.
Step-by-step explanation:
The coverage that pertains to your personal possessions, any items you borrow that are damaged, lost, or stolen, and your liability for injuries that occur in your home is known as renter's insurance. This type of insurance is similar to homeowner's insurance, but it is specifically designed for individuals who rent their living space. Just as homeowner's insurance, this policy covers personal property in the event of theft or damage and provides liability coverage in case someone is injured while on the property. Regular premiums are paid by the policyholder to the insurance company, which then provides compensation based on the coverage terms if a loss occurs.
Insurance companies calculate the cost of premiums based on the likelihood of certain events happening within a group of people with similar risks. When an insured event takes place, the affected individuals can claim compensation from the pool of premiums collected by the insurance company. Various types of insurance exist to protect against different kinds of risks such as health issues, automobile accidents, and life-threatening events, providing financial security to individuals and businesses.