Insurance manages risk so that when you buy a policy you pay a premium which in effect, transfers the cost of a loss to the insurance company. If you suffer a loss, then the insurance company will pay for it (in full or in part depending upon the policy) so that you can get your life on track as soon as possible.
If you make a claim than your insurance will either repair or replace the item that has been lost or damaged. What an insurer will do and how much they will pay (directly to you or to a third party) depends upon the terms and conditions of the policy you have purchased.
What do Insurance companies do with my money?
Insurance companies invest all the premiums they receive form their customers. This allows them to grow their funds and pay out compensations when a you (the policyholder) makes a claim.