Introduction to Insurance
A more suitable definition of insurance (guarantee) is the economic value of a person in case of risk of death. Thus, the left party can still receive a certain amount of money in the insurance policy agreement, the money can be used as a cost of living by the beneficiaries.
Life Insurance is a form of financial protection provided for the life, health of a person against the risk of death, illness or accident, by the insurance company based on the agreement between the Policyholder as the Insured and the Life Insurance Company as the Insurer in accordance with the conditions stated in the policy.
Function of Insurance:
Benefits of Having Life Insurance
Life insurance needs to be owned with the aim of providing protection against financial losses caused by the risk of uncertainty in human life or for the planning of a happy and prosperous future.
Forms of Life Insurance
Before determining life insurance that suits your needs. Preferably, identify and understand in advance the form of life insurance itself.
Definition of insurance according to Article 246 of the Code of Trade Law (KUHD) of the Republic of Indonesia:
Insurance or coverage is an agreement, under which an insurer binds itself to the insured by receiving a premium, to provide reimbursement to him for a loss, damage or loss of expected profit, which he may suffer due to an uncertain event.
Berdasarkan definisi tersebut, maka dalam asuransi terkandung 4 unsur, yaitu :
Understanding and Principles of Risk
In everyday life we often hear the term "risk". Various risks, such as the risk of fire, being hit by other vehicles on the road, the risk of flooding in the rainy season and so on, can cause us to bear losses if those risks are not anticipated from the beginning. The next question is, what is the definition of "risk", especially in insurance?
What is "risk"?
The definition of "risk" in insurance is the uncertainty of the occurrence of an event that can cause economic losses.
What are the forms of risk?
Forms of risk include pure risk, speculative risk, particular risk and fundamental risk.
Pure risk is a risk that as a result there are only 2 kinds: loss or break even, for example theft, accident or fire. Speculative risk is a risk that consequently there are 3 kinds: loss, profit or break even, for example gambling. Particular risks are risks derived from individuals and local impacts, such as plane crashes, car crashes and downed ships. While fundamental risks are risks that do not come from individuals and their impacts are widespread, for example hurricanes, earthquakes and floods.
As an organization, companies generally have a goal in implementing risk management. The objectives to be achieved include reducing spending, preventing companies, personal and family from failure, raising profits, reducing production costs and others.
What is "risk management"?
Risk management is a risk management process that includes identification, evaluation and control of risks that can threaten the continuity of the company's business or activities.
What are the stages in risk management?
The company must go through the stages in implementing risk management, the first stage is to identify the risks that may be experienced by the company, after that, evaluate each risk by reviewing the severity (risk value) and its frequency. Then, the last stage is risk control. This must be divided into 2, namely physical control (risk eliminated, risk minimized) and financial control (risk withheld, risk transferred).
Eliminating risk eliminates all possible losses. For example, in driving a car in the rainy season, the speed of the vehicle is limited to a maximum of 60 km/h. Minimizing the risk is an effort to minimize losses, such as in production, the chance of failed products can be reduced by quality control.
Withholding risk means bearing the whole or part of the risk, by forming a reserve in the company to deal with the losses that will occur (own retention). While the transfer of risk can be done by transferring losses / risks that may occur to other parties, such as insurance companies.
Insurance is one form of risk control carried out by transferring risk from one party to another in this case is the insurance company.
What is the meaning of insurance?
According to the Code of Trade Law (KUHD) article 246 it is stated that insurance or coverage is an agreement with which an insurer binds itself to an insured, by receiving a premium, for reimbursement to the insured due to a damage or loss of expected profit that the insured may suffer due to an uncertain event.
Another definition of insurance is a risk transfer from the first party to the other party. In granting is controlled by the rule of law and the validity of principles and teachings universally embraced by the first party and other parties.
From an economic perspective, insurance means a collection of funds that can be used to cover or compensate people who experience a loss.
What are the benefits of insurance?
Apart from being a form of risk control (financially), insurance also has various benefits which are classified into primary, secondary and additional functions.
The main function of insurance is to transfer risk, raise funds and balance premiums. Insurance secondary function is to stimulate business growth, prevent and control losses, has social benefits and as savings. While the additional function of insurance is as an investment fund and invisible earnings.
Are all risks insured?
Not all risks can be insured. The risks that can be insured are risk that can be measured by money, homogeneous risk (the same risk and pretty much guaranteed by insurance), pure risk (this risk does not bring profit), particular risk (risk from individual source), risk that occurs suddenly (accidental), insurable interest (insured has an interest in the object of coverage) and risks that are not contrary to the law.
Basic Principles of Insurance
In the world of insurance there are 6 kinds of basic principles that must be completed, including insurable interest, utmost good faith, proximate cause, indemnity, subrogation, and contribution.
The right to insure that arises from a financial relationship between the insured and the insured and legally recognized.
Utmost good faith
An act to accurately and completely disclose all material facts about something that will be insured whether requested or not. This means that the insurer must honestly explain clearly everything about the extent of the terms / conditions of the insurance and the insured must also provide clear and correct information on the object or interest insured.
An active, efficient cause that creates a chain of events that cause an aftermath in the absence of an intervention that begins and actively from a new and independent source.
A mechanism by which the insurer provides financial compensation in its efforts to place the insured in the financial position that he has shortly before the occurrence of losses (KUHD article 252, 253 and affirmed in article 278).
Transfer of claim rights from the insured to the insurer after the claim is paid.
The right of the insurer to invite other insurers who are equally responsible. But they do not have to equalize their obligations to the insured to participate in providing indemnity.