WHAT IS INSURANCE?

 

Insurance is coverage or agreement between two parties, in which one party is obliged to pay contributions/contributions/premiums. The other party has the obligation to provide full guarantee to the contribution/contribution/premium payer if something happens to the first party or his property in accordance with the agreement that has been made

The term insured usually refers to anything that is covered.

Insurance in Law No. 2 Year 1992

Insurance in Law No. 2 of 1992 concerning insurance business is an agreement between two or more parties, in which the insurer binds himself to the insured, by receiving insurance premiums, to provide reimbursement to the insured due to loss, damage or loss of expected profit or third party legal liability incurred may be suffered by the insured, arising from an uncertain event, or providing a payment based on the death or life of the insured person.

The agency that distributes the risk is called the "insured", and the agency that accepts the risk is called the "guarantor". The agreement between the two bodies is called a policy: it is a legal contract that defines each of the terms and conditions covered. The fee paid by the "insured" to the "insurer" for the risk covered is called the "premium". This is usually determined by the "guarantor" for future claimable funds, administrative fees, and profits.

For example: a couple buys a house for IDR 100,000,000. Knowing that losing their home would lead them to financial ruin, they took out insurance coverage in the form of a home ownership policy. The policy will pay for the replacement or repair of their homes in the event of a disaster. The insurance company pays them a premium of IDR 1,000,000 per year. The risk of losing your home has been passed from the homeowner to the insurance company.

Insurance in the Book of Commercial Law (KUHD)

Insurance or Coverage is an agreement in which an insurer binds himself to an insured, by receiving a premium, to provide compensation to him due to a loss, damage or loss of expected profit, which he may suffer due to an unspecified event.

— Definition of Insurance according to the Commercial Law Code (KUHD), regarding life insurance or coverage, Chapter 9, Article 246, [3]

Basic principles of insurance

In the world of insurance there are 6 basic principles that must be met, namely:

1. Insurable interest

The right to insure, arising from a financial relationship, between the insured and the insured is legally recognized.

2. Utmost good faith

The act of disclosing accurately and completely, all material facts regarding something that will be insured whether requested or not. The meaning is: the insurer must honestly explain everything clearly about the extent of the terms/conditions of the insurance and the insured must also provide a clear and correct description of the insured object or interest.

3. Proximate cause

An active, efficient cause that creates a chain of events that creates an effect without the intervention of something that starts and is active from a new and independent source.

4. Indemnity

The mechanism by which the insurer provides financial compensation in an effort to place the insured in the financial position he had just before the loss occurred (Commercial Code articles 252, 253 and emphasized in article 278).

5. Subrogation

Transfer of claim rights from the insured to the insurer after the claim is paid.

6. Contribution

The insurer's right to invite other insurers who are equally responsible, but does not have to have the same obligations towards the insured to participate in providing indemnity.