What is Insurance?

What is Insurance?

 Based on the Financial Services Authority (OJK), insurance is an agreement that occurs between an insurance company and a policyholder. This agreement forms the basis for receipt of premiums by the insurance company in return for replacing or reducing losses. That is, by insuring something, you are running a loss share against the insurance company.

 Although, based on the Law of the Republic of Indonesia No. 40 of 2014 concerning Insurance, insurance is an agreement between two parties, an insurance company and a policy holder, which is the basis for receiving premiums by insurance companies in return for:

 provide compensation to the insured or policy holder due to loss, damage, tariffs that arise, loss of profit, or disciplinary liability to third parties that may be suffered by the insured or policy holder due to the occurrence of an uncertain moment; or

 provide payments based on the death of the insured or payments based on the life of the insured with benefits whose amount has been determined and/or based on the results of fund management.

 Meanwhile, according to the KBBI, (Insurance, as a verb, namely) coverage (agreement between two parties, one party is obliged to pay contributions and the other party is obliged to provide full guarantees to the contributors in the event that something happens to the first party or their property is appropriate).  by agreement).

 In general, insurance is a form of agreement between the insured and the insurer. The insured will have to pay dues to the insurer. The goal is to obtain compensation for financial risks that may occur.

 The insurer for this is the insurance company.  Although, the insured is the customer or the owner of the insurance. There are 3 main factors in it, namely policies, premiums, and insurance claims.

 A policy is a document that spells out the agreement between the two parties.It contains benefits, premium amounts, risks, and so on.Although, the premium is a fee that the customer must pay within the time frame according to the agreement.

 A claim is a legal submission to an insurance company when a risk occurs. Determination of any risk that can be borne is written in the policy.  So, if a disaster is included in the agreement, then you can rely on insurance to lighten the weight.

 The Importance of Insurance in Life
 After understanding what insurance is, here are some things that are important for everyone to have insurance.Check out the full review below.

 1. Provide additional protection for yourself and your family
 Unexpected events can happen to anyone, anywhere and anytime.  Having life insurance will really help you to anticipate if that happens.Why do you need life insurance?  Life insurance is insurance paid by insurance companies to insurance holders if they are affected by unexpected losses such as death, complete disability, and unproductive situations (too old) resulting in loss of sources of income.

 If you are the head of the family and if the unexpected happens to you, having life insurance will provide financial protection for the bereaved family.

 2. Become a component of financial planning for the future
 You must have various dreams and aspirations that require financial support.To make it happen, you form a financial planning tactic, for example by saving or investing over a certain period of time. The financial planning that you have can be more targeted at running, when the elements of the risks of financial loss you have minimized well with insurance.

 The simple model, every month you invest 20% of your regular income for various short, medium or long term financial goals.If you have health insurance, then when you fall sick and need treatment rates, cash flow is not disrupted because there is insurance that covers the cost of such things. The budget allocation for investing is still safe and your financial goals can be more easily generated.

 On the other hand, if you don't have insurance, your cash flow will be disrupted to pay for treatment.  It is possible that the share of income that was originally used for investment will be disrupted.

 3. Become a safety net in unexpected situations
 In sound financial management, everyone should ideally build and have a safety net. This financial safety net is mainly supported by two things, namely the existence of an adequate emergency fund and insurance. An emergency fund will be very useful in helping you deal with unexpected events that require an instantaneous absence of cash.However, this emergency fund has limited points.The average person is expected to have an emergency fund of at least 6 times the monthly spending points.

 In summary, if your monthly expenses are IDR 7 million, then the correct emergency fund amount is IDR 42 million.The problem is, emergency funds have limitations.When someone falls ill and requires a week's worth of treatment in the hospital up to Rp. 50 million, the emergency fund can immediately run out like that.This is where it is also important to complete a personal financial safety net with insurance.

 Insurance is the main safety net for you to face the risk of large financial losses.  For example, every month you pay a health insurance premium of Rp. 700 thousand to receive health protection with points of traveling Rp. 300 million for a year.Thus, with a small amount of IDR 700 thousand per month, you protect the potential risk of spending IDR 300 million in hospital fees.When one day you are sick and need treatment that costs up to Rp. 300 million, your personal finances do not need to be tempted.

 4. Reducing the risk of possible bankruptcy or assets running out due to medical fees
 Everyone is aware that current medical and health rates are not cheap. In fact, the rates for such things are getting more expensive from day to day. This cost is related to technology in the increasingly sophisticated medical field.Especially health has increased by 13% every year.With such an expensive rate, it is not impossible that you will go out of business when you are obliged to pay the treatment fee.You when sick comes unexpectedly.This is where the importance of insurance that will cover the cost of treatment.You just pay a premium every month or every year, so the risk of bankruptcy due to the high cost of medical and health care can be minimized.In fact, many people suddenly become poor after being sick.  So, don't underestimate insurance.

 5. Provide time efficiency until the payment system for health facilities
 The next important reason for insurance is time efficiency and payment methods if you need treatment. The facilities provided by insurance will make you more comfortable and efficient in treatment.When you are sick, you will receive treatment quickly and directly without having to think about tariffs again. Only by displaying the insurance card or e-card stored in the application, the hospital can immediately carry out treatment without the need to disclose administrative fees/deposits for the most important room first when you enter the hospital.The hospital will immediately transfer the payment to the insurance company.

 6. You are a customer to receive the best health facilities
 Having insurance is the same as having access to the best health facilities when seeking treatment.  You will receive the best health services and facilities according to the premium paid. Usually the benefits of health services can be obtained such as hospitalization, ICU room rates, expert doctors, critical illness treatment, reimbursement of drug and prescription rates, outpatient care, to death benefits.  For example, the hospital partner provided by the insurance company is also a competent hospital with various complete facilities.This fee is certainly different from the service you get if you only rely on BPJS.BPJS not only provides level I health facilities for treatment, in contrast to insurance it can provide the best expert doctor and hospital services with complete completeness, even with the latest technology to accelerate healing, even minimizing side effects or complications that will arise.

 7. Gives a sense of security, silence, and comfort
 Another reason it is important to have insurance is to provide a sense of security, silence, and comfort. You can be ignored that by having insurance, you will feel more secure, quiet, and comfortable in living life. Tariffs have a sense of anxiety or fear if something unexpected happens in the future.This fee is because you have health protection or protection that can be applied at any time if needed.By having insurance, you will not be afraid to bother your family or closest people if you have to pay for treatment in large quantities.

 8. Train yourself to be more disciplined in limiting finances
 Seems simple, but raising money to pay insurance premiums has proven its benefits.You can train yourself to be more disciplined in handling expenses.  Insurance premiums are borne every month, which means you should limit your monthly budget so that insurance premiums don't interfere with other expense items.Let's just say you're saving and raising money for the future, even if it's in a protection format.

 9. Reduce stress and worry about the future
 The sudden onset of illness can stress you out, especially if you don't prepare an emergency fund to cover treatment.Moreover, treatment that is increasingly expensive from day to day is also a mental stress in itself. Well, by having insurance, it can reduce the pressure and stress that may occur. Later insurance will cover the cost of treatment so you don't have to think about health rates.Moreover, you add life insurance, so stress will decrease.  No unexpected things happen in the future, the feeling will be calmer and avoid stress.This is where the importance of life and health insurance to have.

 10. Provide a combination of investments for the future
 Investment is something that is no longer normal for all of us.This investment can be in the form of property investment, stocks, gold, mutual funds, bonds and so on.For those of you who are interested in investing, insurance is a must-have.Why is insurance needed in investment programs?

 In investing, the emergence of risks is really possible.  If you don't want to have more protection for your investment, it is highly recommended to have investment insurance.That is, if you have an investment that is classified as high risk, this investment insurance will certainly provide you with protection from losses if that happens.