Know the Functions and Purpose of Insurance

Insurance is an agreement that occurs between a customer and an insurance company. The contents of the agreement is that the insurance company is willing to bear a certain amount of money due to a loss in the future after the customer has agreed to pay money (premium). There are several types of insurance and each has the same general insurance goals. The types of insurance include life insurance, accident insurance, loss insurance, and there is also fire insurance.

Premiums or money paid by customers are usually much smaller when compared to the natural loss that will be experienced by customers if certain events actually occur. Many insurers require their customers to pay a premium once a month, but there are also insurers who receive premium payments vary. The amount of premium deposited also varies depending on the type of insurance and insurance company. But usually the size of the premium to be paid is calculated on the basis of a premium rate multiplied by the sum insured.

The following are the functions and objectives of insurance that might increase your knowledge about insurance and further strengthen your intention to insure.

Insurance function

The following are the main functions of insurance:

Risk Transfer

This risk transfer means that the risk will be transferred to the insurance company as the guarantor. So that the amount of uncertainty of the loss suffered by the customer due to an unexpected event will be replaced by the insurance company in the form of compensation or compensation claims because the customer has paid a premium.

Fundraising

Funds sourced from customers will be collected and then the insurance company will be managed in such a way that it can grow. The results of money management from customers will later be used to pay compensation if the customer experiences an unexpected and detrimental event.

Premium Balance

The insurance company will arrange for premium payments to be balanced with the risk to be borne by the insurer. Thus both parties will not feel disadvantaged by the existence of the agreement. For other than life insurance, the premium amount will be determined based on the premium rate multiplied by the desired coverage value. For life insurance, usually the amount of the premium is usually in accordance with the agreement or the provisions of the insurance company.

Whereas the additional function is as a means for saving investment funds, preventing losses and minimizing losses. In addition, insurance is also useful to stimulate economic growth so that business is increasing.

Insurance Purpose

Insurance has several purposes, including as a guarantor to customers to protect them from risks that will be suffered if an unexpected event occurs. Insurance can also improve the efficiency of a matter, customers do not need to do various security and supervision efforts because it will spend a lot of time and effort.

The purpose of insurance as an even distribution of costs, the intention is that the customer will only incur certain costs and not have to pay for the losses suffered because the insurance company will bear them. This is certainly very beneficial for customers because the amount of loss suffered is uncertain.

Life insurance has a very noble insurance goal, which is as customer savings. This is because the amount to be received will certainly be far greater than the amount of premium paid. But unfortunately this goal only applies to life insurance only.