Functions of Insurance

The primary function of insurance is a transfer mechanisms or risk transfer or risk transfer mechanism, which transfer risk from one party, namely the insured to the insurer. The transfer of risk does not mean eliminating the possibility of misfortune, but the insurer to provide financial security facilities or financial security and tranquility or peace of mind for the insured. In return for this, the insured is obligated to pay the premium in a relatively small amount when compared with the potential losses that may be suffered.

The basic principles that must be met by institutions or companies engaged in the insurance business are :

Insurable interest is the legal right to insure arising from a financial relationship between the insured with the insured and legally.

Utmost good faith is a measure to express accurately and completely, all the material facts or material fact about something to 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 is 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 is a mechanism by which the insurer to provide financial compensation to put the insured in a financial position that he had prior to the loss.

Subrogation is a transfer of rights demanded from the insured to the insurerafter a claim has been paid.

Contribution is the Right of the insurer to invite more equally bear, but it does not have the same obligations to the insured to help provide indemnity.

Those are some of the main functions of the neighbor information insurance so we can utilize the services of insurance properly so that between the insured and the person in charge of the good cooperation established and sustained. So that in the future no problems in terms of premium claim.