Get to Know the Function of Insurance by Type, Function of Primary and Secondary Insurance
Get to Know the Function of Insurance by Type, Function of Primary and Secondary Insurance - Before diving into the insurance function, we must first understand how insurance works. The principle of insurance has existed since ancient times. Even when our ancestors still used the barter economy system, they had already applied the principle of insurance, you know!
Although it is not the same as the concept of modern-day insurance, the principle is the same:
- That risk will always be there in life,
- This risk makes our lives full of uncertainty,
- But risks can be borne together or divided up.
For example, there used to be a risk of a house fire. If people don't have a home, then their lives become very uncertain. Unfortunately, that risk will always be there. But the risk can be borne together. How to do it?
In the past, if there was a house that was
on fire, then one village would help rebuild the house. If there are other
residents whose houses are burned down, one village will help again. Anyone who
lives in the village so doesn't have to be afraid of the risk of fire.
Maybe the other villagers will not necessarily be able to fully restore the contents of your house, but at least you have a house again. The risk you bear is just to replenish the house with clothes and food.
The business of the past is also so, the risks that exist are divided. For example, when Chinese merchants like to divide their wares into several ships when going down a river with a fast current. This also reduces the risks that exist. For example, they divided their property into 5 ships, and if there was 1 that sank it didn't matter because the other 4 still survived.
Learning from these principles, modern man created an insurance company. What's the point? People both "save" or "invest" in insurance companies. If you experience risks, insurance companies like villages will help you rise from the financial risks you experience.
Well, since you already understand a little bit about the concept of insurance, what exactly are the functions of insurance in modern times? Here are three primary functions and four secondary functions of insurance.
Insurance Functions By Type
Life insurance, its function is to provide financial benefits to the insured if it is caused by death. For example, if you are the head of the family, then your wife and children are entitled to a sum insured from the insurance company after your death.
Health insurance. The function of health insurance itself is protection for your health. You don't need to bother with hospital medical expenses such as outpatient and inpatient because the insurance company will cover your medical expenses. There is even health insurance that gives you daily hospitalization benefits, you know. For example, My Hospital Protection from Super You. You can get compensation of up to IDR 1 million per day.
Education Insurance. The function of
education insurance is to be an alternative to guarantee the education of
children. This insurance benefit is obtained when the child becomes the insured
of the policy when he reaches a certain age and enters a certain level of
education.
Motor vehicle insurance, its function is as car insurance or motor if it is damaged or lost to the vehicle.
Property insurance, its function is as protection if your property experiences the risk of fire, flooding, or laziness which is the cause of property loss.
Old age fund insurance, its function is as
a pension fund for your welfare if you have entered old age.
Business insurance, its function is as protection for losses that occur to your business. This insurance is carried out according to the agreement.
Travel insurance, its function is to protect in case of losses suffered during the trip. Losses such as cancellations or delays in departure and arrival lost baggage items, and medication while you are traveling in a certain accident.
What is the primary function of insurance?
The primary function of insurance provides direct benefits to individuals who have insurance. So the function is still at the individual level, including:
1. Diverting risks
We already know that risk will always be there. Most times it's unexpected. Whether it is, suddenly being fired or having an accident, or being diagnosed with a strange disease though. We'll never know, and of course, we don't expect that to happen to anyone.
However, sometimes the risk exists and befalls us. Then what can be done? Yes, we transfer the risk to the other party. In this case, the other party is an insurance company.
Imagine that you bought accident insurance from Super You. If you (Amit-Amit) have an accident and fracture, then Super You will accept your financial risk. You don't have to worry about the risk of not being able to pay for the operation, and you only need to focus on recovering from your situation.
The risk is no longer the burden of your own dependents alone but is helped to be borne by the company. Your burden or loss due to this risk is reduced and lighter.
2. Gives certainty
If you experience a risk, then you will suffer a loss. These disadvantages can be fraught with uncertainty, starting from the thought:
"Wow, how do I cover up the
loss?",
"Do I still have enough money?",
"What if I go bankrupt?",
"What if I can't pay?"
And how-how the other. What then? Yes, if
you have insurance, you don't need to experience this uncertainty. You don't
need to ask "how" anymore because the risk is already covered by the
insurance company.