Throughout life, throughout the world, there are a variety of situations that may be caused due to natural, or due to human factors. Some of them can have consequences, with economic damage occurring, that can undoubtedly have a major financial impact on the individual or on society as a whole. The fear of sudden loss is always present. The need for security and protection against sudden loss, both for the individual and for society at large, has always been of high level.
How often do we just hear that some property burned out as a sudden fire result? Did car accidents happen every day? Someone was injured and suffered some health consequences? Or flooded goods or products in a warehouse caused huge material damage for a company that owns them? If we think about it, each of us needs some protection, whether it's to protect ourselves from possible, sudden, loss, associated with our own health, the health of our loved ones, our home, our car, or we own a business and want to protect it from a sudden loss that may be as result from theft, fire, flood, etc.
The question then arises: How to secure the need for security and to protect ourselves from any losses that may occur in such and many other examples of everyday life situations?
The answer is: through INSURANCE.
Insurance is a form of risk management, primarily aimed at reducing financial losses. Insurance is the transfer of the risk from the insured (individual or company) to the insurer (an insurance company), by paying the insurance premium set by the insurance contract.
Let's look at the definition and learn the BASIC TERMS used in it, which are common in insurance.
Risk - the risk is the chance something harmful or unexpected could happen or the occurrence of a sudden loss. This might involve theft, fire, or damage to valuable property and belongings, or it may involve someone being injured.
Insured - is the contractor of the insurance, ie the person who is insured against certain risks, which may be an individual or a company.
An insurer is a specialized insurance company in which the insured transfer their own risk.
Insurance contract. It is a contract between an insurer and an insured. For that contract, the insured receives a document called POLICY and is obligated to pay the insurance premium. Then, the insurer is obliged, upon the occurrence of the insured case, to pay the compensation amount, ie its part. Each insurance contract separately lists all insured risks. There are also listed all terms and obligations of both insured and insurer.
The insurance premium is the amount that the insured pays to the insurer, under the insurance contract, for the purpose of providing insurance protection. The premium is actually the price for the risk. The amount of the premium is determined by the average amount of risk.
Let summarize:
1. We want to protect ourselves from some risk (insured),
2. We make a contract with an insurance company (insurer),
3. For that, we get a Policy, which sets out a certain amount to pay, called a premium.
4. Thus we transfer our risk to the insurance company. This is how we ensure our protection or security against possible risks.
5. If that risk arises, we will be compensated by the insurance company.
But why would insurance companies take our risk?
All this is based on the basic logic of insurance, which is that the risks of multiple insurers are linked into one fund. For example, one individual fears that the risk of theft in his home is small, but he is afraid because he knows the consequences would be severe. Therefore, he will pay for insurance. However, the insurance company will have a large number of such insured and with the amount collected of total premiums, the company will be able to easily cover the amount to be paid to one insured. Based on statistics, the insurance company knows, that theft can occur only in a very small number of cases.
TYPES OF INSURANCE
There are basically two types of insurance:
1.Life insurance - with which we insure life. This type of insurance has financial compensation in case of death or disability.
2.General insurance - which covers all other risks except death. These include the following types of insurance:
The list of types of insurance goes on.
*Insurance that occurs in businesses for protecting the company and employees is called BUSINESS INSURANCE.
* Some types of insurance give the option of being insured individually or in groups, such as health insurance. If the insurance is split between multiple users, it is called COINSURANCE.
* In certain situations, insurance is mandatory by law, for example, Car insurance.
WHAT WHEN RISK OCCURS?
In the event of a risk occurring for which someone is insured, that person or company should report it to the insurance company with which he has an insurance contract. Upon submission of the appropriate documentation, the insurer will have to make a decision, and if everything is upon the policy, they will have to pay the amount required to cover the costs and the risk will be compensated.
In addition to one, the insured can be insured against the same risk in another company. It's called DOUBLE-INSURANCE and it's completely legal.
But what can insurance companies do to protect themselves from big costs in certain situations, at least in part? They may transfer a part of the risk to another insurance company. It's called REINSURANCE.
What is the importance of insurance in society?
The importance of insurance is really big for society itself. This can be seen through:
Knowing the importance of insurance for both individuals and society, insurance is more than necessary in everyday life. We know there are so many risks that can undoubtedly be reimbursed, without economic suffering. Forms of insurance have existed since ancient times in various forms, insurance exists today, established by law and regulations, and forecasts are that insurance will continue to be one of the most important things in people's lives in the future.
