Understanding Insurance.
Insurance demand arises because people are essentially risk averse, so they have an incentive to transfer risk. They prefer to pay or spend some money instead of taking risks such as losing a home, or losing a modil or other property that can degrade their wealth. Funds issued to transfer these risks are called insurance premiums.
In the Book of Commercial Law (KUHD), Insurance or Coverage is defined as an agreement by which an insurer binds to an insured, accepting a premium, to provide reimbursement to him for a loss, damage or loss of expected profit, which may will suffer for an event that is not certain.
Based on unforeseen events, insurance can be classified into life insurance (life nsurance) and general or non-life insurance (property insurance).
Life Insurance.
Life insurance provides protection against the flow of funds or income to the heirs due to death. If the policyholder dies, the insurer will make the payment in a certain amount at once or through a series of payments to the heirs.
Life insurance contracts are long term, so the source of funds for the company is relatively stable. While the claims against a bad incident is relatively predictable because it is only related to one event that is death and potential loss is relatively predictable. With such utility criteria it is possible for insurance companies to allocate some of their funds to long-term assets.
The products of life insurance companies include disability insurance, annuity, health insurance, and life insurance. Its products are categorized into term (life), full (whole life) and universal or universal life.
Disability Insurance or so-called disability insurance is an insurance product that protects or protects or guarantees against income stream (replacing lost income) if the insured party is disabled so the body can not work anymore.
Annuity is an insurance product that guarantees a lifetime income stream. Those who are healthy and have a long history are usually most interested in this product. Insurance annuities include expensive insurance.
Health Insurance is an insurance product that provides protection or protection against relatively expensive medical expenses. This product is favored by potentially sick people. Individual health insurance is an insurance that is issued at an expensive price.
Health insurance is usually issued or sold to companies to provide protection against health insurance employees. To cope with very large expenses, the Insurance Company only finances substantial health expenditures. While other health costs are financed by the company where the customer work or employees.
Term Life Insurance is an insurance product that provides death benefits but no cash increase. Does not contain investment element. The older the age of the insured, the higher the probability of death, so the cost of the policy (premium) is higher.
This insurance is difficult to sell considering that when the insurance period has expired, the policyholder does not benefit from the premium he has paid.
Full Life Insurance is an insurance product that has two characteristics, namely:
- Pay a certain amount of value at the death of the insured.
- Accumulate the cash value that the policyholder can borrow.
If the insured is still alive until the maturity date of the policy, then the insured will receive a certain amount of value that can be used to purchase the annuity. Thus, full life insurance provides a guarantee to the insured throughout his lifetime.
Universal Life Insurance is an insurance product that provides benefits kombinai between life insurance futures with full life insurance. Premiums paid equal to full life insurance. The benefits provided or received are greater because some are used to buy life insurance, and the rest is used for tax-exempt investments. If the market interest rate is high, then universal life insurance becomes more attractive and much preferred.
General or Non-Life Insurance.
Included in general or non-life insurance are property insurance, casualty insurance and liability insurance.
Property Insurance is an insurance product that provides protection or protection against income streams from property (houses, cars, shops, factories and others) due to events such as accidents, theft, fire, natural disasters and other unavoidable events.
Liability Insurance or liability insurance is an insurance that provides protection to the insured against third party claims due to defective or accident product. For example Car insurance can be in the form of property insurance that provides reimbursement when the car is damaged. And or accident insurance that will pay a third party claim in case of accident caused by car policyholder.
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Library:
Mangani. K. S., 2009, "Bank & Other Financial Institutions" Publisher Erlangga, Jakarta.