Monday, March 18, 2019

What is insurance ?

Insurance is a coverage or an agreement between two parties whereby one party, is obligated to pay dues/contributions/premium. Other parties have the obligation of guarantee wholly to the payer of dues/contributions/premiums in case something that befell the first party or his goods in accordance with the agreements already made)

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The term "insured" usually refers to everything that is protection

Legal basis 
Insurance in law No. 2 Th 1992 

Insurance in law No. 2 Th 1992 regarding business Insurance is an agreement between two or more parties, in which the insurer committing yourself to the insured, by receiving premiums of insurance, to provide replacement to the insured because of the loss, damage or lost profits expected legal liability or third party that may be suffered by the insured, arising from an event which is uncertain, or providing a payment that based upon his life someone who died.

The Agency distributes risk called "the insured", and the Agency accepts the risk of so-called "insurer". The agreement between the two bodies is called policy: this is a legal contract that outlines each of the terms and conditions are reserved. Costs paid by the "insured" to "insurer" for the risk borne by the so-called "premium". This is usually determined by the "insurer" for funds that can be claimed in the future, the Administrative cost, and profits.

An example: a couple buying a home costing $ million. Knowing that lost their homes will lead them to financial ruin, they take insurance protection in the form of home ownership policy. The policy will pay for replacement or repair their houses in case of disasters. Insurance companies about their premiums amounting to Rp1 million per year. The risk of losing the House have been channeled from the homeowner to the insurance company.

The insurer uses actuarial science 

The insurer uses actuarial science to calculate their risk estimate. Actuarial science uses mathematics, mainly statistics and probability, which can be used to protect risk to estimate the claims at a later date with reliable accuracy.

For example, many people buy insurance policies home ownership and then they pay a premium to an insurance company. When the loss occurred, the insurer must pay the claim. For some of the insured, the insurance benefits they receive are much greater than the money they had been paid to the insurer. Others may not make claims. If averaged from all policies sold, the total claims paid out lower than the total premiums paid to the insured, with the difference is the cost and profit.

Insurance companies also benefit investment. Was obtained from investing premiums received until they have to pay the claim. This money is called "float". The insurer can earn the profit or loss of the price change float and also interest rates or dividends on the float. In the United States, the loss of property and deaths recorded by the insurance companies was US $142,3 billion within five years that ended in 2003. But the total profit in the same period was US $68,4 billion, as a result of float. 

The basic principle of insurance 

In the world of insurance there are 6 kinds of basic principles that must be met, namely:

1. Insurable interest
The right to insure, arising from a financial relationship between the insured and the insured with legally recognized.

2. Utmost good faith
An act to disclose accurately and completely, all the facts which the material (material fact) about something that would be insured either requested or not. Meaning: the insurer must honestly describe everything clearly about the extent of the terms/conditions of insurance and the insured must also give a clear description and correct over objects or interests which dipertanggungkan.

3. Proximate cause
An active, efficient causes which give rise to a chain of events that give rise to a result in the absence of an intervention that began and actively from new and independent sources.

4. Indemnity
A mechanism in which the insurer provide financial compensation in his efforts to put the insured in a financial position to which he had just prior to the occurrence of damages (article 252, 253 KUHD and reaffirmed in article 278).

4. Subrogation
Transfer of a right of claim of the insured to the insurer after the claims paid.

5. Contribution
The right of the insurer to invite other insurer alike bore, but not necessarily the same obligations toward the insured to provide indemnity.

Rejection of insurance 
Some people regard insurance as a form of betting in force during the period of the policy. Insurance companies bet that property buyers will not be lost when the buyer paying out the money. The difference in the fees paid to the insurance company against the quantities they can receive when the accident happened almost the same as when someone bet on horse racing. For this reason, some religious groups including the Amish avoid insurance and dependent upon the support received by the communities of them when the disaster occurred. In the community the close relationship and support in which its people can help each other to rebuild the lost property, this plan can work. Most societies could not effectively support system as above and this system will not work for large risks


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