Purpose and Function of Insurance


A misfortune, or an accident could happen at any time. Therefore it is good we consider to follow the insurance program, or in everyday language is said: enter insurance.

Insurance is intended to minimize or reduce the risk arising from the accident. With insurance we can transfer the risk to the insurance.


Insurance can be useful as:



Having an insurance policy, then, the insured person will avoid the possibility of risk of loss in the future and feel safe and calm his soul because the insured object has been guaranteed by the insurer policy.

Insurance can also serve as:


Saving Infrastructure

Saving infrastructure means, some of the insured funds have a cash value and can be taken back, this includes certain types of insurance such as whole life or endowment, there is a type of insurance product that accidentally combined with investment, called unitlink.


Better Cost and Benefit Allocation

The greater the risk of losses that arise, the greater the premium coverage of the insurer policyholders.


Giving Level of Certainty

The major benefit of insurance is, because they are essentially trying to reduce the uncertain consequences of an adverse, predictable condition so that the cost of such losses becomes definite or relatively more certain.


Helps Increase Business Insured Productivity

The insured will invest in a particular business field (High Risk Business) if some of the investment risk can be covered by insurance to reduce the risk that may occur in the future.


Credit Guarantee

Insurance policy can be used as loan collateral, usually only for life insurance and highly selective for certain types of loans and banks.


Also read:

Insurance Principles

Kinds of Insurable Risks

How to Plan to Participate an Insurance Program

Glossary of insurance terms

What is meant by Insurance


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