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Credit Default Swap:

You pay some money. If a default event happens at a particular company during the period of the contract, they run an auction for the debt of that company. They then pay you the difference between £10m (or whatever) and the price obtained at auction for £10m (or whatever, same as previous number) of debt for that company.

Like an insurance policy, but claims are dealt with much quicker, and you don't need to prove that you actually suffered a loss from the default event in order to make a claim.

Suppose you were owed money by Debenhams who went bust recently. If you had a credit default swap for the balance of the loan, you would put your debt into the auction, and you would receive full payment for the loan from a combination of the auction proceeds and the swap payout.

Suppose you weren't owed money by Debenhams. You could still buy a credit default swap and receive a payout even though you hadn't lost any money from their bankruptcy. That's the difference between a credit default swap and a credit insurance policy.

Another difference is that you can sell your swap to someone else, and if Debenham's credit rating had dropped from when you bought it, you could make a profit on that sale.