Do You Know Insurance is? Here full explanation

insurance defined

Insurance is a financial product that can provide you with financial protection. This product will protect against all risks that could occur. Indeed, this insurance product is no stranger to the ear.

Insurance is one of the essential needs if you want to have more stable finances. In addition to adequate emergency funds, having financial protection is also one thing that cannot postpone.

To better understand what insurance is, please refer to the full explanation.

What is Insurance?

insurance is

Insurance is a form of agreement between two parties, namely the insured and the insurer. The insured party will be required to pay contributions to the insurer.

The purpose of paying premium contributions by the owner of this policy is to get compensation for financial risks that may occur.

You need to know that the insurer is the insurance company itself. Meanwhile, the insured party is the customer.

The goal is to get insurance benefits following the previously selected policy. Not a few people do not understand how insurance works.

The benefits of insurance are many, ranging from life protection guarantees, compensation for medical expenses borne to guarantees for compensation for car repairs.

Insurance is an agreement between the insurance company and the policyholder. This is the basis for receiving premiums by insurance companies to get rewards.

This insurance will provide reimbursement of costs to the policyholder for all losses, damages, and costs incurred because of it.

In addition, insurance will also compensate for lost profits or legal liability to third parties that the policyholder may suffer. This is due to the occurrence of an uncertain event.

In addition, insurance can also provide compensation to the customer who dies by utilizing the amount of insurance that has been previously agreement

Insurance is coverage where this is an agreement between the policyholder and the party who gives a full guarantee to the policyholder.

This happens when something happens to the policyholder. The provision of this guarantee is, of course, following the agreement made previously.

Benefit of Insurance

insurance is

Before you decide to buy insurance, it’s a good idea to know the benefits of having insurance. Well, here are some insurance benefits that you need to understand.

Gives a Sense of Security

Having insurance will give you a sense of security from all risks that may occur later, where the insurance has born all these risks.

That way, you don’t have to worry anymore about the costs you have to pay for the risks that could happen later.

Your savings and assets will be more organized, and the risk of financial losses that could occur can be appropriately minimized.

Become a Long-Term Savings and Investment

The second benefit of insurance is that it can be long-term savings and investments. you can use Insurance itself as an excellent long-term investment tool.

Through this insurance product, you can get valuable benefits for the future. In addition, you can take the value of the investment at any time according to your wishes.

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Easy Financial Planning

With this insurance, you will be helped in managing and planning finances. This is because everything has been diverted for various types of needs.

You also don’t have to worry anymore to think about other costs of the insurance because the risk that occurs will be the responsibility of the insurance.

Minimizing Financial Losses

Another benefit of insurance is that it can prevent and minimize financial losses. An example is when you experience car damage due to an accident.

So, the insurance company will also cover the cost of damage to the car following the previously agreed policy.

So, even though you will have to pay later, the money you will spend will not be complete. You will only bear a few percent, and the insurance company will cover the rest.

Types of Insurance

There are several types of insurance that you can choose according to your needs. starting from health insurance, life insurance, and education insurance.

The following will mention and explain several types of insurance that you can choose according to your needs.

Health Insurance

This type of health insurance is one of the services that includes compensation, including hospital costs, drug costs, doctor’s consultation fees, and surgical costs.

In the health insurance you have chosen, you can add other types of insurance to provide maximum financial protection.

Life insurance

Life insurance is an insurance service that provides financial protection to customers who act as the backbone of the family and are in an accident until they die.

When the insured party dies, the heirs’ right will get benefits in the form of compensation funds. This insurance fund can be used by the heirs to finance his life in the future.

Especially after the insured, who acts as the backbone of the family, has died.

Vehicle Insurance

Apart from health insurance and life insurance, another type of insurance is Vehicle insurance. This type of vehicle insurance is a product that guarantees compensation for the risks that occur in the vehicle.

For example, when your car is lightly or heavily damaged, damaged by natural disasters, to theft.

Vehicle insurance, like car insurance, usually has a premium paid annually. However, if the premium payment per year is considered burdensome, you can buy a car insurance product whose premium is paid monthly.

Home Insurance

This type of home insurance will provide financial protection against the risk of damage to your home or property. The damage in question includes natural disasters, fire, riots, and theft.

Travel Insurance

This travel insurance guarantees compensation for the risks that occur when the customer is traveling—for example, losses caused by damaged or lost baggage to losses due to delayed travel.

In addition, this travel insurance will also guarantee customer protection if the customer has an accident.

What will provide this insurance in compensation for medical expenses and the cost of repatriating the body?

Education insurance

Education insurance is an insurance product with financial guarantees for children’s education until the person concerned graduates from college.

In this type of education insurance, there is usually life insurance for parents. In addition, there is also a breadwinner if the person concerned dies.

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So, the child will still have access to education until he graduates from college. In addition, the child will also receive compensation funds to finance his life after his parents die.

Accident insurance

Apart from vehicle insurance, another type of insurance is accident insurance, where you will certainly need to protect yourself from the financial risk of an accident.

If your vehicle needs repair after an accident, you also definitely need medical expenses for the risks that may occur in the accident.

Critical Illness Insurance

Even if you keep trying to live a healthy life, everyone will have a risk of developing a critical illness, even if it’s only a percentage.

Critical illnesses in question include stroke, cancer, and heart disease. All of these critical illnesses fit into the category of unpredictable diseases.

Meanwhile, the costs you have to spend on the hospital bill itself are not small.

Insurance Element

Insurance has several main elements. The three elements of insurance are insurance premiums, insurance policies, and insurance claims. To understand each of these elements of insurance, please refer to the following review.

Insurance premium

Insurance premiums are fee contributions you have to pay as a customer for a pre-agreed period. You can pay this premium monthly, semi-annual, or annual basis.

You can adjust the premium payment period according to your capabilities and budget, so it will not burden you later.

Insurance policy

An insurance policy is a legal document that regulates the insurance agreement itself. Starting from the value of the benefits, the amount of premium to be paid, and the risk borne by the customer, to exceptions.

This insurance policy is official and legally binding. If indeed there is a party who violates the policy rules, then the other party has the right to terminate the cooperation that had existed or even sue the party.

Insurance claim

An insurance claim is an official submission process to the insurance company. This can be accomplished when the customer experiences the risks that have been borne in the insurance policy.

Suppose the claim The insurance made follows the policy’s provisions. So, the insurance company will also provide some money as compensation for the financial risks experienced by the policyholder.

Terms in Insurance

By having insurance, your finances can be more protected from all risks of loss that might occur.

Before you buy insurance, it’s a good idea to know some essential terms in insurance first. You will Find the right insurance Product by understanding these insurance terms.

So, what are the terms in insurance that you need to know? Check out the full explanation below!

Insurance policy

The insurance policy is an agreement between the insurance company and the policyholder that specifies the kinds of claims a insurer must pay under the law.

Insurance contracts are agreement about specific needs, and as a result, they contain many features that are not in many other types of contracts. Because insurance policies are standard forms, they contain boilerplate language that is common to a wide range of different types of insurance policies.

To obtain insurance protection from an insurance company, you must pay a premium in accordance with the previously agreed upon terms.

In general, an insurance policy is an inclusive contract, which means that it includes all forms associated with the agreement between the policyholder and the insurer. Supplementary writings, such as letters sent after the final agreement, can, in some cases, render the insurance policy a non-integrated contract.

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Insurance premium

Insurance premiums are several premium payments determined as risk coverage costs. The policyholder must pay this insurance premium to the insurance company.

The premium amount will be determined by the insurance company and agreed upon by the policyholder. Many factors will determine the size of this premium.

The more complete the coverage of insurance coverage, the more expensive the premium will be.


The insured is the person who obtains a guarantee of compensation for the risks referred to in the policy from the insurance company.

The insured is not the same as the policyholder. An insured is not necessarily a policyholder.

Insurance Benefits

Insurance benefits are protection obtained by the insured party. In addition, there are also insurance benefits in the form of compensation.


A claim is an application for risk coverage from the policyholder to the insurance company. The goal is to fulfill the policyholder’s rights as stated in the policy.

The insurance company will usually limit the period of insurance claims.

Acquisition Cost

Acquisition costs are costs that the policyholder must pay. The goal is to be able to get services as an insurance customer.

In addition, the cost of this acquisition is also known as the cost of policy issuance. The acquisition cost includes paying for the services of an insurance agent and the company’s operational costs.


The policyholder must pay a premium to the insurance company following the agreement stated in the insurance policy.

So that policyholders can still get insurance benefits, then do not pay premiums past the grace period. If that happens, then the owned insurance policy will automatically be canceled or lapse.

Lapse makes insurance protection you can’t get. When a risk occurs while insurance lapse status. Thus, the insurance company is no longer obligated to bear all the losses suffered by the policyholder.

Cash value

Cash value in insurance is the amount of money the policyholder can buy in a certain period. For example, there is a cash value in education insurance that the policyholder can disburse when he reaches a certain age.

Additional Insurance

Additional insurance is a type of insurance that you can add to your primary insurance plan. This additional insurance usually has a cheaper premium because it only complements the primary insurance.

However, it would help if you remembered that the more additional insurance you take, the broader the benefits.

This, of course, will bring its consequences on the high cost of premiums that you have to pay.

Premium Leave

It’s mean a specific period during which the policyholder cannot pay premiums without losing the insurance benefits.

This is not the policyholder who does not pay the premium. This premium leave is possible in insurance that has investment features.

When the premium leave is executed, the insurer will use the pre-established cash value from the unit-linked investment. The goal is to cover the cost of the premium itself.

Premium leave is also possible if the cash value is sufficient to pay the premium.

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