Definition Insurance, Functions and Objectives - Understanding insurance has been stipulated in Law No. 2 of 1992 on Insurance Business, insurance is an agreement between two or more parties, with which the party is binding to, by receiving insurance premiums, to reimburse the insured for loss, damage, or loss of expected profit, or legal liability to third parties which may be suffered by the insured, arising from an uncertain events, or to provide a payment based on death or life of an insured person.
Insurance objects are properties and services, body and soul, human health, legal responsibility, as well as all the other interests that could be lost, damaged, or loss, or decrease in value
Explanation definition is quite long, but it is simpler insurance can be interpreted as a form of cooperation agreements or contractual transfer of risk for loss of life or property, and then the risk is taken over by an individual or another company, with premium payments which in this case is an insurance company.
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Insurance objects are properties and services, body and soul, human health, legal responsibility, as well as all the other interests that could be lost, damaged, or loss, or decrease in value
Explanation definition is quite long, but it is simpler insurance can be interpreted as a form of cooperation agreements or contractual transfer of risk for loss of life or property, and then the risk is taken over by an individual or another company, with premium payments which in this case is an insurance company.
Other articles: Mutual Fund Investing Strategies options the Intelligent Investo
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Functions and Benefits of Insurance
There are several benefits if we follow the insurance program, are as follows:1. Tool or Infrastructure Savings
Infrastructure saving means, a number of funds that the insured has no cash value and can be retrieved, including certain types of insurance such as whole life or endowment, there is a type of insurance products are deliberately combined with investments, that is called unitlink.
2. Provide Protection or Security.
By having an insurance policy, the insured person will be protected from the possibility of losses later in the day and feel safe and calm his soul because the object has been insured by the insurer I guarantee policy.
3. Allocation of Costs and Benefits More Fair.
The greater the risk of loss incurred, the greater the insurance premiums of the insurer policy.
4. Provide a level of certainty.
A primary benefit of insurance because basically they are trying to mitigate the consequences of an uncertain adverse circumstances, which have been predicted in advance so that the cost of such losses become relatively more certain or uncertain.
5. Help Increase Business Productivity Insured
Assured that will invest in a particular business field (High Risk Business) when most of the investment risk can be covered by insurance to reduce the risks that may occur in the future.
6. Credit Guarantee
The insurance policy can be pledged as collateral for loans, usually for life insurance and is highly selective for certain types of credit and bank.
Type of Risk to Uninsured
In this life is a risk that we can not avoid, but can be minimized by reducing or shifting risk to other parties.However, not all risks can be insured, insurable risk must meet the following characteristics:
Losses are uncertain (definitive), such as death, illness, disability, and old age, including conditions that can be identified, such as the buildings were destroyed, tenggelammnya ships, or the fall of the aircraft.
Losses occur due to accidental factors, such as critically ill late stage, accident, or natural disaster.
Losses are assured, as someone who is no longer able to work because of a work accident, the machine does not work anymore because it was heavily damaged.
Objects insured can be assessed and converted to value for money.
Risks that occur must be naturally, been unintentional and unplanned.
The risk that occurs does not violate the public interest.
Insurance premiums charged value is quite reasonable.
Parties who request insurance must have an insurable interest.
Terms in Insurance
Insurance Policy: Letter of Agreement that contains insurance agreement between the Insurer with the Policyholder.Applicant (Applicant): People who apply for an insurance. If the insurer has been approved, the applicant will be the policyholder.
Policyholders (Policy Owner): Holders of insurance policies.
Insured (Insured): A person who becomes the object insured or insured.
Money Pertangungan recipient (Beneficiary): People or consists of several people designated to receive insurance benefits or insurance money
Sum Assured: Value for money stated in the insurance policy will be paid by the insurer to the Holder.
Premiums: The amount of money to be borne by the insured and listed in the policy and has agreed to pay to the Insurer in accordance with the agreement.
Cash Value: The amount of money listed in the policy that will be paid to the policyholder if the policy is canceled prior to the insurance period expires or when the insured dies.
Insurable Interest: The relationship between the insured and the object is insured by the company, regarding matters that are potentially likely to cause harm that can result in financial losses for the insured.
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Planning Insurance Program
Changes that occur in this phase of life must be adapted to the insurance program will be planned as the number of family members or dependents that continues to grow, the addition of assets in the form of a residence, car and health insurance for the entire family.
The foregoing is a condition that requires adjustments in the insurance program you choose. The following will explain a planning strategy that you can do in the insurance program, among others:
1. Set your primary goal Insurance.
In managing the risk, there are underlying things, such as the possibility of damage to or loss of property you have. Your decision to buy a new car you have to be balanced with efforts to protect from possible loss and the possibility of physical damage to the vehicle due to an accident.
2. Insurance Plan goals.
Something to keep you Think is about risk anything you will face in this life? Adjust these risks with your life purpose.
To understand this, you should try to collect as much information as possible about everything about the insurance program, such as what or who should be insured, types of insurance that are needed, the amount of the premium rate, and the credibility of the insurance company.
3. Deciding, Selecting & Perform Action
Choose a match to the budget planning that you have created, count back of your insurance needs ranging from the need to buy life insurance, health, and insurance that protects the entire property or assets. Do it one by one and try to be realistic with revenue and budget.
4. Perform Evaluation Program You Choose
Think for a period of approximately two or three years or when there is a change in the phase of your life, like getting married, having children, and own their own homes. The need for insurance in the insurance amount will increase as the number of dependents who become the object within the family or the bear necessities of life your parents.
So at a glance Understanding Insurance, Functions and Benefits of Insurance, Risk Type to in the insurance are, of Terms in Insurance and Insurance Program Planning, hopefully this article can be used as reference in choosing your insurance program forward.
Insurance in the Book of the Law of Commercial Law (Commercial code)
Definition of Insurance according to the Book of the Law of Commercial Law (Commercial code), about insurance or age, Chapter 9, Section 246: [2]
"Insurance or the Insured is an agreement by which a binding to an insured, to receive a premium, to provide reimbursement to him for a loss, damage or loss of expected profit, which may be suffered due to an event that is not certain."
Insurers use actuarial science
Insurers use actuarial science to calculate the risks they anticipated. Actuarial science uses mathematics, especially statistics and probability, which can be used to protect risks for expected claims in the future with reliable accuracy.
For example, many people buy insurance policies home ownership and then they pay the premiums to the insurance company. When the loss of protected occurs, the insurer must pay the claim. For some insured, insurance benefits that they receive much greater than the money they have paid to the insurer. Others may not make a claim. When averaged across all policies sold, total claims paid out less than the total premiums paid to the insured, the difference is the cost and profit.
Advantage insurers
Insurance companies also earn investment profits. It is obtained from investing premiums received until they have to pay the claim. This money is called "float". [Citation needed] Insurers can benefit or loss from price changes in the float and also the interest rate or dividend in the float. In the United States, loss of property and deaths recorded by the insurance company was US $ 142.3 billion in the five years ending in 2003. But the total profit in the same period was US $ 68.4 billion, as a result of float. [Citation needed ]
The basic principle of insurance
In the insurance world there are six basic principles that must be met, namely:
insurable interest
The right to insure arising from a financial relationship between the insured with the insured and legallyUtmost good faith
An action to disclose accurately and completely, all facts material (material fact) about something that would be insured whether requested or not. What it means is: the insurer must honestly explain everything clearly about the extent of the terms / conditions of insurance and the insured must also provide a clear and correct for objects or interests of the insured.proximate cause
The active, efficient cause that chain of events that leads to a result without the intervention of the start and working actively from a new and independent source.Indemnity
A mechanism in which the insurer provides financial compensation to put the insured in a financial position that he had prior to the loss (Commercial code article 252, 253 and confirmed in article 278).Subrogation
The transfer of the right to demand from the insured to the insurer after a claim has been paid.Contribution
Rights to invite the other person equally bear, but it does not have the same obligations to the insured to help provide indemnity.
