Insurance is a financial product. Buying insurance can protect you against financial loss. It will pay out money if you are too ill to work, or it will provide for your family if you die.
When you buy insurance, you take out an insurance policy. This is a contract between you and the insurance company (the insurer).
Your policy means you are protected against losing money in certain situations. This protection is called cover. Your insurance policy document will list exactly what you are protected against, and how much money you will be paid. It will also list what you are not protected against.
You will make regular payments for your policy to the insurer. This is usually every month or every year. These payments are called premiums. How much they are will depend on your situation and the type of cover you need.
If the event or situation you are protected against happens, you can contact your insurer to make a claim on your insurance policy.
If your policy covers the situation you are claiming for, your insurer will give you money. This is called a payout.