Definition of insurance: objectives, functions, and types of insurance

General Insurance Definitions

Definition of insurance: objectives, functions, and types of insurance

Actually, what is insurance? The definition of insurance is a form of risk control where a party is transferring the risks that may occur in the future to the other party, in this case the insurance company.

The term "insurance" comes from the English language, "Insurance" which means coverage. So some say insurance definition is a treaty between the insured (customer) with the insurer (insurance company) where the insurance company is willing to compensate the losses that may be experienced by the customer in Upcoming.

In order to obtain insurance coverage for the risks that may occur, the insured party must pay the insurance to the insurer within a certain period of time.

Expert definition

In order to better understand what is insurance, then we can refer to the opinions of some of the following experts:

1. Subekti

According to Subekti (2001), the definition of insurance is an agreement that belongs to the type of profit agreement where this agreement is intentionally based on events that do not necessarily occur in the later days, which events will be To determine the benefit of either party.

2. Emmy Pangaribuan

According to the Emmy Pangaribuan (1992), the definition of insurance is an agreement where the insurer by enjoying a premium bind itself to the insured to free themselves from losses due to loss, loss or absence The expected profit that will be suffered by it due to an uncertain occurrence.

3. Abbas Salim

According to Abbas Salim, the definition of insurance is a willingness to establish small or slight losses that are certainly the substitute for the major losses that are uncertain in the future. So that people can deduced willing to pay a little loss for the present in order to face big losses well.

4. KUHD Article 246

According to the KUHD article 246, the definition of insurance is an agreement with which a insurer cleave to a insured, by accepting a premium, for reimbursement to him due to a damage or loss of profit Expected that may be sustained due to an unnecessarily eventful event.

Objectives of Insurance

Objective of isurance

As mentioned in the above insurance sense, the main purpose of insurance is as a guarantee of reimbursement for the risks that may occur in the future.

Some insurance objectives are as follows:

  1. To divert a number of risks that exist on a party to the insurance company.
  2. A guarantee for a party to be protected for any risk of loss that may occur.
  3. To minimize the potential for greater losses when spending your own costs when there is a risk.
  4. Especially for certain life insurance (life insurance), insurance can be a savings because some premium costs will be refunded to the customer.
  5. For efficiency for a company because it reduces costs for surveillance, security, and protection that takes a lot of cost and time.
  6. To obtain compensation to the customer in accordance with the value of insurance premiums.
  7. To close a loss of earning power of a person or a business entity when it is not working or not functioning anymore.
  8. As a basis for the Bank to give credit to a person or business entity because the Bank requires protection of funds borrowed to the customer.

Insurance function

Then what is the insurance function? As well as a form of risk management, insurance has several other important functions. Some functions of insurance are as follows:

1. Fund Grouper

In this case, the insurance company serves as the fundraising of the community. The collected funds will then be invested into other areas of business to be more productive.

2. Helping businessman focus on business

Each business model must contain risks in it. For entrepreneurs, business insurance is a very important thing to help overcome anxiety in case of unwanted risk.

With the company's insurance, the entrepreneurs can focus more on the operation and development of its business.

3. Reduce potential risks

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. Divide the risk of loss

With insurance, the potential loss can be shared with other parties. In other words, the customer's premium payment is balanced with the risks transferred to the insurance company.

Types of Insurance

Types of Insurance

There are several types of insurance used for various purposes. Some types of insurance are as follows:
  1. Health insurance, which is the type of insurance that provides coverage for health problems caused by accidents or illness.
  2. Life insurance, which is the type of insurance that provides coverage for the death of a customer who has financial value.
  3. Education insurance, which is insurance that provides educational assurance to the insured party.
  4. Business insurance, which is insurance that provides assurance to the company in case of risks that cause losses, such as loss, damage, etc.
  5. Home and property insurance, which is an insurance that provides guarantee to the homeowner or property in case of damage to the property.
  6. Vehicle insurance, which is insurance that provides coverage for the vehicle in case of risks such as accidental damage, loss, etc.

Such a brief explanation of the definition of insurance, objectives, functions, as well as the types of insurance in general. Hopefully this article is helpful and add to your insight.

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