I've always heard of the term insurance and that I should buy insurance if I buy a car.  What does that mean?
Insurance is a way of protection from financial loss. It is there in case you have a wreck.
Why would a company insure me in that manner?  Won't they be out of pocket?  How do they make money from me?
Well, you're going to take a loss. You will pay monthly to guarantee the insurer's promise to compensate you in the event you are in a wreck.
Ah - I see.  So in a way it's a risk management on paying small amounts today to get comfort in the future.  What items can I typically buy insurance on?
Cars, bonds, health, there are many things you can insure.
That sounds interesting - would you know how the monthly payments are calculated?
The amount of money charged by the insurer is a called a premium. It varies.
Does it vary based on the value of the item I want to insure?
Yes and which insurer you decide to go with as well.