Understanding Insurance in General
Actually what is meant by insurance? Understanding Insurance is a form of risk control where one party transfers the risk that may occur in the future to another party, in this case the insurance company.
The term "Asurance" comes from the English language, namely "Insurance" which means coverage. So there are also those who say that insurance is an agreement between the insured (customer) and the insurer (insurance company) where the insurance company is willing to compensate for losses that may be experienced by customers in the future.
To get insurance coverage for possible risks, the insured party must pay a premium to the insurance company within a certain period of time.
Understanding Insurance According to Experts
To better understand what insurance is, we can refer to the opinions of the following experts:
1. Subekti
According to Subekti (2001), the definition of insurance is an agreement that is included in the type of accidental agreement where this agreement is intentionally based on events that do not necessarily occur in the future, where the event will determine a person's profit or loss. party.
2. Emmy Pangaribuan
According to Emmy Pangaribuan (1992), the definition of insurance is an agreement where the insurer by enjoying a premium binds himself to the insured to free himself from losses due to loss, loss or lack of expected profits that he will suffer as a result of an uncertain event.
3. Abbas Salim
According to Abbas Salim, the definition of insurance is a willingness to determine small or small losses that are certain as a substitute for large losses that are not certain to occur in the future. So it can be concluded that people are willing to pay small losses for now in order to deal with big losses well.
4. KUHD article 246
According to Article 246 of the KUHD, the definition of insurance is an agreement in which an insurer binds himself to an insured, by receiving a premium, to compensate him for a damage or loss of expected profit that he may suffer due to an uncertain event.
Insurance Purpose
As mentioned in the definition of insurance above, the main purpose of insurance is to guarantee compensation for risks that may occur in the future.
The objectives of insurance are as follows:
- To transfer a number of risks that exist on a party to an insurance company.
- Guarantee for a party to get protection against all risks of loss that may occur.
- To minimize the potential for greater losses if you incur your own costs when the risk occurs.
- Especially for certain life insurance (life insurance), insurance can be a savings because some of the premium costs will be returned to the customer.
- For efficiency for a company because it reduces the cost of supervision, security, and protection that takes a lot of cost and time.
- To get compensation to customers in accordance with the value of insurance premiums.
- Cover the loss of productive power of a person or business entity when no longer working or not functioning anymore.
- As a basis for Banks in providing credit to individuals or business entities because Banks need protection for funds lent to customers.
Insurance Function
Then what is the function of insurance? Apart from being a form of risk management, insurance has several other important functions
1. Fundraising
In this case, the insurance company acts as a collector of funds from the public. The collected funds will then be invested in various other business fields to make them more productive.
2. Helping Businesses Focus on Business
Every business model has risks in it. For entrepreneurs, the insurance business is something that is very important to help overcome anxiety in the event of an unwanted risk.
With insurance in the company, entrepreneurs can focus more on operations and business development.
3. Reduce Potential Risk
Every insurance company always provides recommendations to its customers regarding the risks that may occur. That way, one can minimize or even prevent potential risks.
4. Share the Risk of Loss
With insurance, potential losses can be shared with other parties. In other words, the premium payment made by the customer is balanced with the risk transferred to the insurance company.
Insurance Type
There are several types of insurance that are used for various purposes. The types of insurance are as follows:
- Health Insurance, which is a type of insurance that provides coverage for health problems caused by accidents or illness.
- Life Insurance, which is a type of insurance that provides coverage for the death of a customer who has financial value.
- Education Insurance, namely insurance that provides education guarantees to the insured.
- Business Insurance, namely insurance that provides guarantees to the company in the event of a risk that causes losses, such as loss, damage, and others.
- Home and Property Ownership Insurance, namely insurance that provides guarantees to home or property owners in the event of property damage.
- Vehicle Insurance, namely insurance that provides coverage for vehicles in the event of risks such as damage due to accidents, loss, and others.
Thus a brief explanation of the meaning of insurance, its purposes, functions, and types of insurance in general. Hopefully this article is useful and adds to your insight.