About Insurance and types

Insurance

Risk

Risk is the center of insurance and therefore prior to study about insurance in detail, firstly need to understand the meaning of the risk.

This simple word contain two elements:

1. Uncertainty.
2. Loss.

Definition of Risk

Definition of risk in insurance is defined as uncertainty that cause a loss in financial risk where it can be measured.

Risk Classification

Speculative Risk
Speculative risk is the risk that gives the possibility of profit or loss or no profit and no loss (break even point).
Speculative risk also called dynamic risk.

For example: risk in general trading (profit or loss).

Pure Risk
Pure risk is a risk that only have one result, loss. So, no one who will take benefit from this risk.

For example: fire incidence.

Fundamental Risk
Fundamental risk is the risk which the cause and impact is impersonal (not related to someone) and the loss usually involved lot of people.

For example: earthquakes, wars, inflation, etc.

Particular Risk
Particular risk is the risk caused by individual events and limited consequences.

For example: theft cases.

Benefits of Risk Classification

Risk classification is useful in order to determine whether a risk can be insured or not and to determine whether a risk is more appropriately handled by the government of left to the commercial insurance agencies.

Insurable and Uninsurable Risk

- Speculative risk can not be insured because there is a possibility for profit.
- Pure risk can be insured because only have one possibility, the loss, based on juridical and commercial consideration.
But not all of pure risks can be insured.
- Fundamental risk usually the insurance run by government because the consequences of this risk in a number and large area.

Type of risk and uncertainty

Types of risk:
- Personal risk.
- Property risk.
- Liability risk.

Uncertainty:
- Economic.
- The nature.
- Humane.

Insurance Classification

Based on Nature.
- Compulsory insurance.
- Voluntary insurance.

Based on Purpose.
- Life insurance.
- Social insurance.
- Losses insurance.

Based on Ownership.
- Government-owned insurance.
- Private property insurance.

Based on Law Form.
- Limited company.
- Cooperative.
- Joint venture.

Based on Object.
- Human.
- Property.

Based on Activities.
- Protection on individual activities.
- Protection on business activities.

General types of Insurance

1. Loss insurance.
Loss insurance is an insurance that provides services in dealing with the risk of loss, loss of benefits, and legal liability to third parties arising from uncertain events.

2. Life insurance.
Life insurance is an insurance that provides services in dealing with risks related to the life or death of an insured person.

3. Social insurance.
Social insurance is an insurance program shall be by an Act, with the aim to provide basic protection for the welfare of society and is not intended for commercial gain.

Specific types of insurance

LOSS INSURANCE

1. Insurance of marine transportation.
- Ship framework insurance.
Insurance that bear the vessels of the body, main and supportive engines, standard equipment (such as lifeboats, anchors, engine tackles, propeller, etc.).

- Marine cargo insurance.
This is an insurance that protects the cargo owner and goods owner against the possible of damage or loss of cargo ship or the goods.

- Integrated cargo insurance.
This is an insurance that protects transport goods or cargo owner either by sea, land, and air.

2. Aviation insurance.
Objects of coverage in air transport insurance include the aircraft and its cargo (goods and passenger) agains the possible of unwanted incidences.

3. Aircraft insurance.
Object of coverage in the aircraft insurance is the aircraft itself, which include the frame and engines, propellers, motors, and all equipments part of the aircraft.

4. Insurance Satellite Space.
Objects coverage in all types of losses of caused by failure on the launch of a satellite into space.

5. Land transport insurance.
Object of coverage in land transport insurance is the land transport vehicle with its cargo.

6. Motor vehicle insurance.
Object of coverage is the motor vehicle itself from damage or loss.

7. Passenger accident insurance.
Object of coverage in all types of losses cause accidents experienced by passengers.

8. Fire insurance.
Fire insurance an coverage that guarantees the loss or damage of property caused by fire.

9. Engineering insurance.
An insurance applied in development projects related to engineering.

10. Company insurance.
- Money transfer insurance.
- Money storage insurance.
- Money embezzlement insurance.
- Money theft insurance.
- Liability insurance.
- Company process insurance.

11. Credit insurance.
The parties who become insured is the lender (bank or financial institution), while the insurer covers the credit risk.

LIFE INSURANCE

1. Individual insurance.
It is a form of cooperation between people who want to avoid or at least reduce the risk caused by:
- Death.
- Old age.
- Accidents.

2. Personal accident insurance.
Namely to provide assurance to the person that he or his heirs will received compensation due to an accidents.

3. Health and medical insurance.
An insurance to provide coverage for any costs of care and treatment of an illness, such as surgery procedures, medications, therapy, implantation, and healthcare.
Insurance companies may limit the number of illness or medical actions in their platform.

4. Pet insurance.
Similar to individual insurance but specifically to animal. The coverage area including treatment and healthcare.

SOCIAL INSURANCE

Social insurance is an insurance that provides social security for members of the community locally, regionally, and nationally.

In addition, there is called Reinsurance.
Reinsurance is a re-coverage of some or all of the risks from an insurance company to another insurance company under an agreement.