Definition, Purpose, Function, Type of Insurance

Definition Insurance

Insurance is coverage or agreement between two parties, where one party is obliged to pay contributions / contributions / premiums. The other party has the obligation to provide full guarantee to the contribution / premium / premium payer if something happens to the first party or his property in accordance with the agreement that has been made)

The term "insured" usually refers to everything that gets protection.

Insurance Purpose

The purpose of insurance is basically just in case if the occurrence of a risk on an event.

The other insurance goals are as follows:

1. Providing guarantee of protection from the risks of loss experienced by one party.

2. As an equal distribution of costs, that is enough to only pay a certain amount of costs and do not need to replace the losses that occur with an uncertain and uncertain amount.

3. Increasing efficiency, because it does not need to specifically conduct supervision and safeguards to provide protection that costs a lot of time, energy and costs.

4. As savings, because the amount paid to the insurance company will be returned back in a larger amount than before. (this is especially true for life insurance).

5. The basis of the bank is to provide credit, because the bank itself needs a guarantee or protection for money given to borrowers of money.

6. Closing someone's loss of earnings power or a business entity when it is not working or not functioning.

7. To shift the risk that was originally on the part of the owner to the insurance party who are ready to accept the risk.

8. To give compensation for the loss to the parties concerned and get profits in addition to providing some guarantees to the insurance participants.

Insurance function

Aside from being a form of controlling a risk that occurs, insurance also has several other functions, namely as follows:

Fund collector

One of the duties of insurance companies is to collect funds. Good business management requires that the incoming funds be invested so that the funds are more productive.

Investment activities carried out by insurance companies in addition to supporting national development, can also reduce insurance costs, where with the existence of profits or profits obtained through investment funds, the presentation of profit elements calculated in determining premiums can be reduced.

Help for business companies

Insurance encourages the establishment of a business, an investor who plans to invest in a particular business, it is possible to cancel the plan, because it does not want to bear the risk in the event of a disaster.

With insurance, an entrepreneur will avoid anxiety if there is a risk, so that he can focus more on the efficiency of his business.

So if someone pays a premium with a small amount, he can take advantage of the capital that is supposed to be for the loss fund, thus he can expand and improve his business and if if the risk occurs, the continuity of his business will be more guaranteed.

Risk reduction

There is a recommendation given by the insurance company after a risk survey is conducted to the insured through the surveyor to correct a risk with the applicable premium rate system. For example by imposing their own risk, discount, research and publication on the ways and causes of loss, with certain efforts or actions.

Therefore, insurance companies make important contributions to the economy by minimizing the possibility of a risk occurring.

Distribution of losses evenly

With the spread of losses evenly, it can be interpreted that the amount of contributions or contributions paid by the insured party to premium funds is balanced with a risk transferred.

Types of Insurance

The types of insurance are as follows:

Health Insurance

Health insurance is an insurance that provides coverage for health problems caused by an illness or accident.

Life insurance

Life insurance is an insurance that guarantees the death of an insured person by providing financial benefits.

Vehicle insurance

Vehicle insurance is a type of insurance that provides insurance services to vehicles that experience loss, damage and so on.

Education insurance

Educational insurance is insurance that guarantees a good educational life. For example Prudential and BNI Life Insurance.

Business insurance

Business insurance is insurance that guarantees a company in its business activities including substantial losses, damage and losses.

Home and property ownership insurance

Home and property ownership insurance is insurance that provides services to homeowners from a risk such as damage to housing and damage to personal property.