What is Insurance
Insurance is a term used to refer to the act, system, or business where financial protection (or financial compensation) for life, property, health and so forth to get reimbursement from the events that can not be expected to occur such as death, loss , damage or illness, which involves the payment of premiums on a regular basis within a specified period in exchange for a policy that ensures the protection.
The term “insured” usually refers to everything that the protection. Insurance is basically a requirement which is quite important and should be met by every individual. In the wheel of life, without realizing a lot of threats and hazards referred to the risk of life. The risk of the lives of ordinary tangible illness, critical illness, permanent disability or death.
6 Basic Principles of Insurance
In the insurance world there are 6 kinds of basic principles that must be met, namely:
* Insurable : interest right to insure arising out of a financial relationship, between the insured and the insured is legally recognized.
* An action : Utmost good faith to disclose accurately and completely, all facts material (material fact) about something that would be insured, whether requested or not. The meaning is: the insurer must honestly explain everything clearly about the extent of the terms / conditions of the insurer and the insured must also provide a clear and correct for objects or interests of the insured.
* Proximate : cause means the active, efficient cause that chain of events that brings about a result without the intervention of any force started and working actively from a new and independent source.
* Indemnity : A mechanism by which the insurer provides financial compensation to put the insured in a financial position that he had prior to the loss
* Subrogation : transfer of demand from the insured to the insurer after a claim has been paid.
* Contribution : right person to invite the other person equally bear, but do not have the same obligations to the insured to participate in providing indemnity.
At this time has developed various types of insurance in society, in risk management, insurance allows sharing and transferring risk, this is the best way to compensate. Most people, do not understand the fundamental differences in the type of insurance, but insurance program to determine the most suitable to the needs, we must recognize the types of insurance.
Insurance is divided into two main types
1. Traditional Insurance
2. Non-Traditional Insurance (modern)
In the traditional insurance, is divided into several types of insurance, the insurer usually has long been used by consumers.
Traditional insurance consists of:
Explanation TERM insurance
– You never know about Auto Insurance or Motor? Or maybe health insurance? Well kind of term insurance is usually purchased by many people, because the premium payment cheap and get great benefits. In other words, pay less, failure by many, but if it is not used in insurance claims and does not occur, then the money we deposited will be forfeited. Of that fact, we can see, no savings element in this type of insurance, so call us to buy our security guarantee within 1 year or a certain period. We pay the same as travel insurance, time will be billed an amount of money on a plane, after getting off the plane safely, the contract is completed. Because the premium payment period is not specified, then every year, premiums will increase with age insured.
Wholelife insurance explanation
– Wholelife, meaningful life. This type of insurance protects the insured until the end of the age, are usually covered up to age 99 years. And great! premium payment period is determined from the outset, there could be no extension of the period of premium payment. If elected for a 5-year, five-year pay him yes, then life will not be billed again, whenever we passed, we can still claim the sum assured that we have planned. Because the system is saved, then started the second year of the policy cash value is created, in particular the savings can be captured at up to 80%. Cool ga? Besides protection still go ahead, there are also savings, but the cash value is not much compared to the value of PROTECTION.
Endowment insurance explanation
– Endowment, this is life insurance with a value greater savings. In certain years the savings can be withdrawn in accordance with the program. Usually this type of insurance known as education insurance or pension insurance. Insurance education is determined when the money could be taken for school fees dearest. The Endowment system, life insurance savings bonus, if anything happens when saving, then we get the sum assured as death benefit, but in the event of an obligation to pay claims, insurance companies still pay the claim until the contract is completed. Usually the premium offered is much larger than the type TERM and Wholelife.
Non Traditional insurance or insurance called modern, is a type of insurance with UNIT-LINK. Where the Unit Link Insurance is very popular at the moment, why? because unit-Link is a type of insurance that combines life insurance and investments. Mated life insurance with investment, is a type TERM. Remember! TERM if it is a short-term insurance, and insurance costs could rise with age.
UNIT + LINK = TERM Investment
Most people take a Unit Linked because they want to save the results many times, than have savings in the bank, the interest does not amount to much. By investing or MUTUAL FUND, then the money we invest will grow prolifically. But you have to remember, the greater the profit, the greater the risk.
Investment can increase and may decline, according to the economic development of the nation at that time. In times of crisis, it is certain that the value of investments that we have dropped dramatically, and consequently the value of our savings will be depleted. If so, do not protest my last want gain a lot, means must bear the loss as well .. 🙂
It is certain, on the type of unit link insurance, do not have a cash value that is guaranteed, even the company that issued the insurance policy, the cash value can not promise that obtained in X. Another case of traditional insurance, in her policy is clearly stated and guaranteed cash values obtained in X.
Because there is no guaranteed cash value, probably in the 11th or so, the insured must pay the premiums back, even though the promised pay only 10 years old, in fact is not listed in the policy premium payment period, so that premiums can be BILLED BACK at any time.
Link Unit, bear the cost of life insurance is the type TERM, then each year the costs will go up with age, and the cash value that is formed will cut the cost of insurance and other administrative costs.
• Insurance provides protection when disaster strikes. Every day, “disaster” threatens you. Ranging from homes due to disaster fire, accident, or simply catch the disease from their colleagues in the office. With insurance, it occurs when a critical condition. Your mind can be calm. Therefore, all events outside of the plan are already protected by insurance. Moreover, when mortality risk of illness such as heart disease, stroke, and cancer are certainly, require no maintenance costs little. Health insurance could be the solution to this kind of conditions.
• Insurance can help you manage finances more wisely. Insurance with a certain guarantee that you choose can be “Way out” of financial problems at the onset, to cover the cost of daily living. Therefore, the range of facilities options insurance, you can get various advantages in these critical moments.
moreover, you can also set how much it costs invested in insurance so could actually manage expenses more easily. Plus, if you have life insurance, the time of death, your family would not be abandoned because it was bailed for living expenses.
• Insurance to help enjoy a better future. When retirement someday, if not prepared early, you can desperate for revenue from monthly income suddenly reduced drastically or even no income at all. Therefore, in order to remain able to enjoy old age, retirement savings plan plus health insurance package will make retirement more enjoyable.
• Insurance can help prepare your child’s school tuition. When your child enters school age, certainly a lot of expenses that you need to prepare. From year to year the higher education expenses. How The good of the child was aged 0 years, you have to prepare for their insurance education. And planning costs education from elementary to college. Thus education is secure even if something is not untoward happen to their parents.
Some people think of insurance as a form of betting in force during the period of the policy. Insurance companies are betting that the property buyer will not be lost when the buyer pays the money. Differences in fees paid to the insurance company against the amount they can receive when the accident occurred about the same as when someone bet on horse racing (eg, 10 to 1).
For this reason, some religious groups, including the Amish avoid insurance and rely on the support received by their communities when disasters occur. In the community and supports a close relationship in which the people can help each other to rebuild the lost property, this plan can work. Most people can not effectively support the system as above and the system will not work for big risk.