Definition of Insurance

Definition of Insurance

Before making your choice, what insurance do you want to use for your family and yourself it helps you advance Understanding Insurance. It's all in the hope that you better know about insurance inside. the problem is not all of those who become members at an insurance company understand what the purpose of the insurance. and on this occasion a complete material you want to give to the little knowledge on Understanding Insurance And Its history.

Well now you see the defenition of insurance below. read clearly and accurately so that you better know some more of the insurance. more detail below:

Understanding Insurance

The main function of insurance is a mechanism to transfer risk (risk transfer mechanism), which transfer risk from one party (the insured) to another party (the insurer). Risk aversion is by no means eliminates the possibility of misfortune, but the insurer to provide financial security (financial security) and tranquility (peace of mind) to the insured. In return, the insured pays the premium in a very small number when compared to the potential losses that may be suffered (Morton: 1999).

Basically, an insurance policy is a contract that is a valid agreement between the insurer (in this case the insurance company) with the insured, where the insurer was willing to bear some losses that may arise in the future in return for payment (premium) of a particular insured.

According to Law No.. 2 of 1992, which referred to the insurance or coverage is an agreement between two or more parties, by which the parties committed themselves to the insured, by accepting the insurance premiums to provide reimbursement to the insured for loss, damage or loss of expected benefits, or legal liability to third parties that may be suffered by the insured, arising from an uncertain events, or to provide a payment based on the death or life of an insured person.

In order for a potential loss (which may happen) can be insured (insurable) then it must have the following characteristics:

The loss of uncertainty,

Losses should be limited,

Loss must be significant,

Loss ratio can be predictable and

Loss is not catastrophic (disaster) for the insurer.