Life is full of unexpected risks, that's why we need to understand about insurance. Some natural events that occurred in recent years and takes a lot of casualties, both fatalities and property, such as reminding us of the need for insurance. For every member of society including the business world, the risk for experiencing disadvantage (misfortune) as this is always there (Kamaluddin: 2003). In order to overcome the losses, people develope a mechanism which we now know as insurance.
The primary function of insurance is as a mechanism to transfer risk (risk transfer mechanism), which transfer risk from one party (the insured) to another party (the insurer). The transfer of risk is by no means eliminates the possibility of misfortune, but the insurer to provide financial security and tranquility (peace of mind) for the insured. In return, the insured pays the premium in a very small number when compared with the potential losses that may be suffered (Morton: 1999).
Basically, the insurance policy is a contract that is a valid agreement between the insurer (in this case the insurance company) with the insured, where the insurer was willing to bear some losses that may arise in the future in return for payment (premium) certain of the insured.
Insurance History
Insurance originated from the people of Babylon 4000-3000 BC, known as Hammurabi agreement. Then in 1668 AD at the Coffee House Lloyd's of London London stands as the forerunner of conventional insurance. Sources of insurance law is positive law, natural law and pre-existing examples as culture.
Insurance bring economic as well as social mission with the premiums paid to insurance companies to guarantee the transfer of risk, namely the transfer (transfer) the risk of the insured to the insurer. Insurance as a risk transfer mechanism where the individual or business move some uncertainty in exchange for premium payments. The definition of risk here is that uncertainty occurs whether or not a loss (the uncertainty of loss).
Insurance in Indonesia started in the Dutch colonial period, associated with the success of the country's companies in the plantation sector and trade in Indonesia. To meet the needs of a guarantee of continuity of business, the course is required of insurance. The development of insurance industry in Indonesia had a vacuum during the Japanese colonial period.
Collateral requirement can be filled by the Life Insurance
1) Personal Needs, including: the provision of living expenses such as final costs associated with death, the cost of bill payment in the form of debt or loans must be repaid; family allowance, costs of education, and pensions. In addition, a life insurance policy that has cash value can be used as a savings or investment.
2) Business Needs, such as: insurance on key persons (insurance for key people within the company); insurance on business owners (insurance for business owners); employee benefit (employee benefits), for example, a collection of life and health insurance.
Source: Morton, G. (1999). Principles of Life and Health Insurance. LOMA.