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More details on the definition of insurance

More details on the definition of insurance | Loss of an object, disease, even an accident that always lurks in every person’s life. No life is 100 percent safe from these distractions. Such a disruption is a risk that has to be dealt with from time to time and which often results in the loss of property and assets.

Various efforts should be made to avoid risk factors. For example, you may want to use shuttle transport to keep your child going to school to avoid the risk of an accident on the road, which is more risky when your child is traveling alone on public transport.

Another example: You lead a healthy lifestyle, from food to exercise, to prevent diseases that can make it harder for you to get to the point where treatment costs a lot of money.

However, the name of risk is definitely about stalking you and your assets. For example, you have tried to protect your vehicle by installing a double lock each time you park. But one time when the flood came your vehicle was swept and damaged.

This risk is of course seldom taken into account. This is another time you encounter a fire in your home that is the result of a fire spreading that hit your neighbor’s house. When a disaster occurs, in addition to the loss of property, valuables in your residence can also be burned. It is also possible that you will suffer pain as a result of the incident.

Literally, risk can be interpreted as an opportunity or potential loss that can arise without your prior wish. The element of uncertainty in risk means that this possibility can happen to anyone, anytime, anywhere.

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Definition of insurance

Insurance is a contract between two or more people in which the insured person pays premiums in order to obtain compensation for the risk of loss, damage, or loss that may occur as a result of unforeseen events. The term “insurance” itself comes from the English language for “insurance” and the Dutch for “assurantie” or “verzekering.”

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Insurance cannot eliminate the risk of unforeseen events, but insurance can reduce the impact of losses arising from these events, both on a small scale and on a large scale. Insurance has now become part of long-term financial planning for some people.

Elements of insurance

Risk is usually closely related to your loss. This loss factor is the person’s fear of facing it. In order to minimize the losses resulting from the risk of an event that may happen to you, you should take risk mitigation measures. One way is to have insurance that suits your needs.

The insurance comes from the English language, namely the insurance which matters as a guarantee and protection. In risk management products, insurance is a mechanism that can transfer risks that may be faced by the insured to the insurer or insurer.

The risk is transferred through the payment of compensation transferred by the policyholder to the insured who has suffered a loss as a result of an insured event or condition.

Insurance cannot stop the risks that may befall you, your family and your property. However, this type of service is able to reduce or limit the impact of losses due to risk.

This makes insurance more popular today as everyone doesn’t want to worry too much about the possibility of losing due to lurking dangers.

Evidence of the transfer of risk from the insurer to the insured is listed in the policy issued by the insurer to the insured person who has fulfilled the obligation to pay premiums. In insurance, there are three elements that serve as the main guidelines of the risk reduction mechanism for the policyholder:

1. Insurance Premi

You must have heard this term often, but many cannot explain the meaning of premium. Put simply, premiums are liabilities that the policyholder must pay to the insurer as the desired risk transfer service. In order to benefit from the risk transfer from insurance, the obligation to pay this premium must be paid by the insured person.

2. Insurance policy

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In return for the premium paid for insurance services, the insured person is entitled to the policy. The definition of an insurance policy is a contract or contract issued by the insurer to the insured, which is the basis for the payment of compensation to the insured for the loss suffered by him. This policy contains all provisions that will guarantee any damage suffered by the insurance until the details of the insured person are clear.

3. Claim

When you suffer a loss as a result of an event, you can check whether the risk is covered and listed in the policy or not. If so, you can make a claim for loss compensation.

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Criteria for the risk covered by insurance

Thanks to the insurance, you can feel calm and safe as it will reduce the risk of harming you. But you need to know that not all risks can be insured. There are several criteria that a risk must meet in order to ultimately be insured by a risk transfer method.

1. It must be included in the pure risk and contain the special risk

In other words, these threats appear unexpectedly and can happen to anyone. For example, the risk of accidents and the risk of death.

2. Measurable in money

This means that risk transfer is assessed from a financial point of view, not from the emotional side of the insured person. For example, in life insurance, the insurer may only make a transfer in the form of money that has been settled, without the possibility of reviving the deceased.

3. are the same and in large numbers

The number of similar risks becomes the insurer’s judgment to determine the estimated amount of the loss. Special items, such as stamp collections, will be difficult to insure as the insurance company has difficulty determining the amount insured because the value depends on subjective preferences.

4. Happens haphazardly and accidentally

The insurer does not want to be responsible for transferring the risk of losses that may arise from willful misconduct. For example, insurance does not cover someone who is admitted to hospital as a result of an attempted suicide.

5. Checked

In this case, the insurance company demands valid proof of your loss before issuing any compensation. For example, when you lose your insured car, you must have a police certificate stating the loss until you can finally make a claim with your insurance company.

6. Concluding losses for the Insured

That the risks you cover must be with you. If the risk actually only affects other people, the insurer cannot transfer the risk. For example, you cannot insure your neighbor’s motorcycle because if your motorcycle is lost or damaged, it is not you that is harmed, but your neighbor.

Examples of insured risks

From the description of the risk criteria that can be insured, here are some examples of risks that will be approved by an insurer if you want to transfer potential losses.

– Risk of becoming disabled as a result of driving a vehicle.
– Risk of vehicle destruction as a result of an accident.
– Risk of being unable to continue education due to loss of parental income.
– Risk of fire in the building due to electric short circuit.
– Risk of loss of income due to death.
– Risk of damage to homes, vehicles and property from fire or natural disasters.
– Risk of property loss as a result of theft.

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As a risk reducer, insurance companies can provide several other benefits that will allow you to better manage your finances.

Also Read: General and specific insurance benefits

Insurance Benefits You Should Know

The following insurance benefits are actually very useful for the premiumpayer.

1. Gives a sense of security

The risk stakes certainly raise a never-ending concern. If this is the case, it is not excluded that your days will be anxious because of an uncertain problem.

Insurance gives you a sense of security to face it all, so you can focus more on your activities and grow. Your life will be calmer because you feel protected.

2. Giving reassurance

From risks that are uncertain, you can get certainty with insurance. This means that you can estimate the costs or financial consequences of risks that may arise at any time, with a relatively defined value.

3. A place to save and invest

Some types have insurance companies that have a monetary value if not used or if no claim is made. This type is called all life or equipment.

Even now, there is insurance that is linked to investments known as unit link. This type of insurance can not only reduce the risk to you and your assets, but can also be a way to save and a tool for investing.

4. Minimizing the risk of loss

In line with its main risk reversal function, insurance can of course minimize the potential losses you may experience in relation to certain types of risk. This is what makes insurance known as a risk reducer.

5. Improving business operations

Imagine that your premises has suddenly been destroyed or its assets have disappeared. Of course, you need to provide large funds for the exchange so that the business can continue to develop.

In the case of insurance, the insurance company may incur the loss so that the existing funds can be used to improve business operations.

Insure your risk reduction

Insurance cannot eliminate risks that may arise in your life. But with insurance, you will be of great help if suddenly there is a risk and it causes big losses.

With an insurance policy, you will not automatically incur a loss. The risk resulting in the payment of compensation from the insurer will be transferred to you as a form of coverage of the premium paid by you.

Your life can go on as normal right away without worrying about how much time and money it will take to repair the financial losses that arise from these threats.