Insurance - Definition, Types & Examples

Insurance - Definition, Types & Examples

Definition of Insurance

"An agreement between the insurer and the insured, which requires the insured to pay a premium to provide compensation for the risk of loss, damage, death, or loss of expected profits, which may be suffered due to an unexpected event (insurance)." Financial Fervices Authority

"insurance (agreement between two parties, one party is obliged to pay contributions and the other party is obliged to provide full guarantees to the contributors if something happens to the first party or his property in accordance with the agreement made)." Indonesia Dictionary


What is Insurance?

Insurance is an agreement between two or more people in which the insured party pays contributions/contributions/premiums to obtain compensation for the risk of loss, damage, or loss, which may occur due to unforeseen events. The term insurance itself comes from English, namely "insurance" and Dutch, assurantie or verzekering.

Insurance cannot eliminate the risk of unexpected events, but insurance can reduce the impact of losses arising from these events, whether on a small or large scale. Now insurance has become part of financial planning for some people for the long term.


Elements in Insurance

  • Premium. Premium is an obligation paid by the insured party to the insurer (insurance service provider) as a risk transfer service. This premium payment must be repaid by the insured party to be able to use the insurance benefits when needed.
  • Insurance policy.An insurance policy is a legal document that forms the legal basis for the relationship between the insured (customer) and the insurer (service provider/insurance company). The policy acts as a basis for paying compensation for damages or losses suffered by the insured. The policy is made by agreement and must be made in writing.
  • Claim.An insurance claim is an official application submitted by a customer to an insurance company to make a payment as a form of compensation for damage or loss based on the provisions of the insurance policy. Before making the payment, the insurance company will check the validity of the claim first.


Types of Insurance

Types of Insurance in Indonesia include:

  • Health Insurance.Health insurance provides protection with health and treatment costs for the insured in the event of an accident or illness. This type of insurance is widely provided by the company or agency where a person works.
  • Life insurance.Life insurance covers the death of a person by providing financial benefits to the insured for his death. When the insured dies, the policyholder will receive the sum insured from the life insurance.
  • Education insurance.Education insurance can be said as savings for the future in order to ensure the education of children from the policy holder (the insured). This insurance has become popular because of the increasing cost of education from year to year, so it is not uncommon for parents to now have education insurance.
  • General insurance.General insurance is protection against the risk of loss and loss experienced by the policyholder. One of the well-known general insurance is Motor Vehicle Insurance. This type of insurance guarantee is usually short term.


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