Lets assume you buy a call (right to buy) 100 shares of Xyz company at an agreed price (strike price) on an agreed date (expiration date) at say $40 per share and you pay $5 for the option.
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The premium you pay each month gives you the right to a benefit if some event in the future happens and you decide to exercise your right to have the insurance company pay you for that event.
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If Xyz Company is trading at $50 per share on or before the expiration date your option is in effect worth $10.
Similar to futures, options can give the holder protection against adverse price moves.