Insurance

Definition of 'Insurance'
Definition: A financial risk management tool in which the insured transfers a risk of potential financial loss to the insurance company that mitigates it in exchange for monetary compensation known as the premium.
Description: Insurance policies, a contract between the policyholder and the insurance company, are of different types depending on the risk they mitigate. Broad categories include life, health, motor, travel, home, rural, commercial and business insurance.


Insurance is a term used to refer to the actions, systems, or business where financial protection (or compensation financially) to life, property, health and so forth get reimbursement of events that can not be predicted to occur as death, loss, damage or illness, which involves the payment of premiums on a regular basis within a specified period in exchange for a policy that ensures such protection.

The term "insured" usually refers to everything that protection.

Legal Basis

Insurance in Law No. 2 Th 1992
Insurance in Law No. 2 Th 1992 on insurance business is an agreement between two or more parties, with which the party is binding to, by receiving insurance premiums, to reimburse the insured for loss, damage or loss of expected benefits or legal liability third party may be suffered by the insured, arising from an uncertain occurrence, or provide a payment based on death or life of an insured person.

Agency risk that channel called "insured", and the agency receiving the risk of so-called "insurer". The agreement between these two bodies is called policy: This is a legal contract that explains each of the terms and conditions are protected. Fees paid by the "insured" to "insurer" for the risks covered by so-called "premium". This is usually determined by the "guarantor" for the funds that can be claimed in the future, administrative costs, and profits.

For example: a couple bought a house worth Rp100 million. Knowing that the loss of their homes would lead them to financial ruin, they took the insurance protection in the form of home ownership policy. The policy will pay replacement or repair their homes in case of disaster. Insurance companies on their premiums amounting to Rp1 million per year. The risk of losing their homes have been distributed from homeowners to the insurance company.

Insurance in The Book of The Law of Commercial Law
Definition of Insurance according to the Book of the Law of Commercial Law (Commercial code), about insurance or age, Chapter 9, Section 246
"Insurance or the Insured is an agreement by which a binding to an insured, to receive a premium, to provide reimbursement to him for a loss, damage or loss of expected profit, which may be suffered due to an event that is not certain."

Insurers Use Actuarial Science
Insurers use actuarial science to calculate the risks they anticipated. Actuarial science uses mathematics, especially statistics and probability, which can be used to protect risks for expected claims in the future with reliable accuracy.
For example, many people buy insurance policies home ownership and then they pay the premiums to the insurance company. When the loss of protected occurs, the insurer must pay the claim. For some insured, insurance benefits that they receive much greater than the money they have paid to the insurer. Others may not make a claim. When averaged across all policies sold, total claims paid out less than the total premiums paid to the insured, the difference is the cost and profit.

Advantage Insurers
Insurance companies also earn investment profits. It is obtained from investing premiums received until they have to pay the claim. This money is called "float". [Citation needed] Insurers can benefit or loss from price changes in the float and also the interest rate or dividend in the float. In the United States, loss of property and deaths recorded by the insurance company was US $ 142.3 billion in the five years ending in 2003. But the total profit in the same period was US $ 68.4 billion, as a result of the float.


The Basic Principle of Insurance
In the insurance world there are six basic principles that must be met, namely:

Insurable Interest
The right to insure arising from a financial relationship between the insured with the insured and legally.

Utmost Good Faith
An action to disclose accurately and completely, all facts material (material fact) about something that would be insured whether requested or not. What it means is: the insurer must honestly explain everything clearly about the extent of the terms / conditions of insurance and the insured must also provide a clear and correct for objects or interests of the insured.

Proximate Cause
The active, efficient cause that chain of events that leads to a result without the intervention of the start and working actively from a new and independent source.

Indemnity
A mechanism in which the insurer provides financial compensation to put the insured in a financial position that he had prior to the loss (Commercial code article 252, 253 and confirmed in article 278).

Subrogation
The transfer of the right to demand from the insured to the insurer after a claim has been paid.

Contribution
Rights to invite the other person equally bear, but it does not have the same obligations to the insured to help provide indemnity.


Rejection Insurance
Some people think of insurance as a form of betting in force during the period of the policy. Insurance companies are betting that property buyers will not be lost when the buyer pays the money.
The difference in the fees paid to the insurance company against the amount they can receive when the accident occurred about the same as when someone betting on horse racing (eg, 10-to-1).
For this reason, some religious groups, including the Amish avoid insurance and rely on the support received by their communities when disasters occur.
In a community that is close and supportive relationship where people can help each other to rebuild the lost property, this plan can work. Most people can not effectively support the system as above and the system will not work for a big risk.

The Insurance Regulatory and Development Authority, an agency of the Government of India, is the regulatory body for the insurance sector's supervision and development in India.

Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.

An entity which provides insurance is known as an insurer, insurance company, or insurance carrier. A person or entity who buys insurance is known as an insured or policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and must involve something in which the insured has an insurable interest established by ownership, possession, or preexisting relationship. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. The amount of money charged by the insurer to the insured for the coverage set forth in the insurance policy is called the premium. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster.




Modern Insurance

Insurance became far more sophisticated in Enlightenment era Europe, and specialized varieties developed.
Property insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses.
The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667".
A number of attempted fire insurance schemes came to nothing, but in 1681, economist Nicholas Barbon and eleven associates established the first fire insurance company, the "Insurance Office for Houses", at the back of the Royal Exchange to insure brick and frame homes. Initially, 5,000 homes were insured by his Insurance Office.

At the same time, the first insurance schemes for the underwriting of business ventures became available. By the end of the seventeenth century, London's growing importance as a center for trade was increasing demand for marine insurance.
In the late 1680s, Edward Lloyd opened a coffee house, which became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, and those willing to underwrite such ventures. These informal beginnings led to the establishment of the insurance market Lloyd's of London and several related shipping and insurance businesses.


Types of Insurance

Auto insurance
Gap insurance
Health insurance
Income protection insurance
Casualty insurance
Life insurance
Burial insurance
Property insurance
Liability insurance
Credit insurance




Other Types

All-risk insurance is an insurance that covers a wide range of incidents and perils, except those noted in the policy. All-risk insurance is different from peril-specific insurance that cover losses from only those perils listed in the policy. In car insurance, all-risk policy includes also the damages caused by the own driver.

Bloodstock insurance covers individual horses or a number of horses under common ownership. Coverage is typically for mortality as a result of accident, illness or disease but may extend to include infertility, in-transit loss, veterinary fees, and prospective foal.
Business interruption insurance covers the loss of income, and the expenses incurred, after a covered peril interrupts normal business operations.
Defense Base Act (DBA) insurance provides coverage for civilian workers hired by the government to perform contracts outside the United States and Canada. DBA is required for all U.S. citizens, U.S. residents, U.S. Green Card holders, and all employees or subcontractors hired on overseas government contracts.
Depending on the country, foreign nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.
Expatriate insurance provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
Legal expenses insurance covers policyholders for the potential costs of legal action against an institution or an individual. When something happens which triggers the need for legal action, it is known as "the event". There are two main types of legal expenses insurance: before the event insurance and after the event insurance.
Livestock insurance is a specialist policy provided to, for example, commercial or hobby farms, aquariums, fish farms or any other animal holding. Cover is available for mortality or economic slaughter as a result of accident, illness or disease but can extend to include destruction by government order.
Media liability insurance is designed to cover professionals that engage in film and television production and print, against risks such as defamation.
Nuclear incident insurance covers damages resulting from an incident involving radioactive materials and is generally arranged at the national level. (See the nuclear exclusion clause and for the US the Price-Anderson Nuclear Industries Indemnity Act.)
Pet insurance insures pets against accidents and illnesses; some companies cover routine/wellness care and burial, as well. Pollution insurance usually takes the form of first-party coverage for contamination of insured property either by external or on-site sources. Coverage is also afforded for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site.
The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded.
Purchase insurance is aimed at providing protection on the products people purchase. Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans and even mobile phone insurance. Such insurance is normally very limited in the scope of problems that are covered by the policy.
Tax insurance is increasingly being used in corporate transactions to protect taxpayers in the event that a tax position it has taken is challenged by the IRS or a state, local, or foreign taxing authority.
Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.
Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, loss of personal belongings, travel delay, and personal liabilities.
Tuition insurance insures students against involuntary withdrawal from cost-intensive educational institutions.
Interest rate insurance protects the holder from adverse changes in interest rates, for instance for those with a variable rate loan or mortgage.
Divorce insurance is a form of contractual liability insurance that pays the insured a cash benefit if their marriage ends in divorce.

Document Flood and Fire Damage to Ease Insurance Claims

Victims of the recent flooding in Louisiana and wildfires in California should all do one thing: Document the damage to their property.
Taking photos is crucial to help bolster an insurance claim, said Amy Bach, executive director of United Policyholders, a nonprofit consumer advisory group, particularly with flood damage. Flood coverage is not included in homeowner policies. It must be bought separately, usually from the National Flood Insurance Program, and victims of some previous storms have reported problems getting claims paid.
It is best to promptly remove soggy carpet, bedding and furniture, to help prevent the growth of mold after a flood. But Ms. Bach recommends first taking photographs to avoid the possibility of having damaged property thrown out by cleanup crews before the damage can be recorded.
“No. 1 is definitely to take pictures,” she said, “even though it’s painful and sad.”
In Louisiana, more than 140,000 homes in areas around Baton Rouge may have been affected by heavy rain and flooding that began on Aug. 11. Much of the hardest-hit areas were not considered at high risk for flooding, according to the Federal Emergency Management Agency, so many homes did not carry flood insurance. Homes in high-risk areas must carry flood insurance if they carry a federally backed mortgage, but coverage is optional for lower-risk zones.
In Louisiana, about 42 percent of homes in high-risk areas have flood insurance, but just 12.5 percent of homeowners in low- and moderate-risk areas do, according to FEMA.
A local business organization, Baton Rouge Area Chamber, called the flooding “almost unprecedented” and estimated that no more than 15 percent of homes in the region were insured against flooding.
Unlike flooding, damage or destruction of a home by a wildfire — or any other type of fire — is usually covered by a standard homeowner’s insurance policy, according to the Insurance Information Institute. Cleaning of smoke-damaged property, like furniture, is also covered.
In California, the fast-moving Blue Cut fire forced the evacuation of about 82,000 residents in and around San Bernardino County and damaged more than 100 homes. Residents began returning to their homes this week, but wildfires continued to burn elsewhere in the state. As with flood damage, it is wise to take pictures before cleaning up or removing debris, Ms. Bach said.
United Policyholders has tips on its website for filing insurance claims after a disaster.
Here are questions and answers about insurance coverage for floods and fire:

Should I consider buying flood insurance even if I live in a low-risk area?

“Yes,” Ms. Bach said, noting that in recent years, flooding has occurred in areas that have not been considered high risk.
In a brief telephone interview, Roy Wright, director of FEMA’s flood insurance program, said homes in lower-risk areas are eligible for so-called preferred-risk policies that carry lower premiums. “People who live in moderate- to low-risk areas should buy flood insurance,” he said. FEMA says that more than 20 percent of flood claims come from policies outside high-risk areas.
FEMA says the average flood insurance premium is about $700, although those for high-risk zones can be much higher. But premiums for preferred-risk policies can range from $240 to $450 a year, Mr. Wright said.
Federal flood policies pay up to $250,000 for damage to a building and its systems, and up to $100,000 for personal belongings, including clothes, furniture and appliances.
To see if your home is in a lower-risk area and what your premium might be, enter your address into FEMA’s online premium estimator.


Does insurance pay for temporary housing after a disaster?


Federal flood insurance policies do not cover temporary housing, Ms. Bach said, and that can present a financial challenge for displaced families. Victims can, however, seek disaster aid. In Louisiana, the federal government has declared a major disaster in 20 parishes, making the residents there eligible for financial assistance, including grants for temporary housing and home repairs. FEMA encourages people to register for aid even if they have insurance, the agency’s spokesman, Rafael Lemaitre, said. “There may be uninsured losses we can cover, depending on the situation.”
Those filing for federal assistance should “document everything,” Mr. Lemaitre said, and expect a visit from a FEMA housing inspector.
In the case of damage from a wildfire, most homeowner policies provide extra living expenses, like the cost of temporary housing and meals out if residents had to evacuate, or must live elsewhere while the home is repaired or rebuilt, according to the Insurance Information Institute. Keep receipts to document expenses.

What if my car is flooded or burned?

Flood insurance generally does not cover damage to your car. But if you carry automobile insurance, flood damage will typically be covered by the “comprehensive” part of the policy, if you bought that coverage. It is often optional. Comprehensive coverage also pays if your car is damaged or destroyed by fire.



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