Definition and Function of Insurance
This article will discuss insurance and benefits. Insurance is a non-bank institution, which can be an option for investing. To reduce the risk of unexpected events.
Insurance itself is divided into three categories, namely life insurance, health insurance, and general insurance. However, this division is still in the general category, there is a division of insurance based on the derivatives of the three insurances.
Definition of Insurance, Functions, and Benefits of Insurance
In general, insurance is defined as an agreement between the insured (customer) and the insurer (the insurance company). Where in the agreement the insurance company is willing to bear a number of losses that may arise at a later date.
In the joint agreement, there is an obligation for the insurance used to pay an amount called a premium, which must be paid to the insurer.
Insurance Purpose
For insurance policyholders, the purpose of insurance is in case of risk in an event.
There are also several purposes of insurance, as follows:
- Provide guarantee and protection in case of a risk experienced by one party.
- Cost equalization means spending a certain amount of money and not needing to compensate for losses based on an uncertain amount of losses.
- Increase efficiency, because to carry out supervision and security as protection does not need to spend a lot of time, effort, and cost.
- As savings, due to the obligation to pay a certain amount of money by the insurance policyholder, it will be returned in full. Even greater than the amount paid to the insurer. If during the agreed insurance period nothing happens, the insurer must pay the agreed amount of money.
- As a guarantor of the credit-giving bank, where the lending bank requires guarantees and protection provided to creditors (borrowers).
- Guaranteeing protection for a person, if he is no longer working due to retirement or stops working.
- Transferring the risk that must be borne by someone to the insurance company.
- In addition to guaranteeing risks to insurance policyholders, insurance also provides benefits to insurance policyholders.
Insurance Functions
The main function of insurance is as a guarantor in case of risk, but there are several other functions of insurance:
1. Fundraising
Insurance is not only responsible for collecting money from insurance policyholders. But they also have to be able to manage incoming funds properly so that these funds can be more productive and developed.
The funds collected by the insurance company will be invested in various fields, especially in business development.
By investing the funds collected from insurance policyholders. The insurance company will benefit. And this benefit will be a premium if an insurance policyholder makes a claim if there is a risk they experience.
2. Business Development Assistance
Insurance also plays a very important role in business development, because of the existence of a guarantor such as insurance. Will provide a sense of security for investors to invest in certain businesses.
With insurance, investors were initially hesitant to invest their capital. Will feel calm if the capital invested in a business is guaranteed from losses if problems arise later.
3. Reducing the Occurrence of Risk
Insurance companies make a big contribution to economic development because they can minimize the possibility of risk.
4. Spread Losses Evenly
The risk of loss that occurs can be minimized with an even distribution system. This can be interpreted that the number of contributions that have been paid by the insurance policyholder will be balanced with the transferred risk.
Types of Insurance
Insurance is divided into several types seen from the function and usefulness of the insurance. Among others :
1. Health Insurance
Health insurance, to provide insurance to policyholders in case of health problems. This guarantee is given when experiencing disease and also the result of an accident.
2. Life Insurance
This type of life insurance is to provides insurance coverage for death experienced by life insurance policyholders. Where insurance will provide financial guarantees to the insured or the party left by the insurance policyholder.
3. Vehicle Insurance
Vehicle insurance will guarantee to vehicle owners if they experience damage, loss, and others based on the insurance policy agreed by both parties.
4. Education Insurance
Education insurance is insurance provided to ensure education is obtained. Usually, insurance is submitted by someone at a certain period, and funds can be claimed if the insurance period expires.
However, this can be said as life insurance coverage, which is aimed at children's education. If the guarantor or underwriter of the insurance policy experiences an event such as death.
5. Business Insurance
Business insurance is insurance that guarantees all business activities from loss, damage, and other things to reduce losses that occur.
6. Property Insurance
Property insurance is insurance provided on a property to avoid loss due to damage, such as fire or others.
Tags:
Insurance