Insurance is a form of risk control, by diverting / transferring risk from the first party to the other party, in this case, to the insurer. Delegation is based on the rule of law and the principles that apply universally, adopted by the first party and the other party.
According to businesses (Indonesian Law) Article 246:
"Insurance is an agreement by which one is binding to an insured, to receive a premium, for reimbursement to him for damage to or loss of expected benefits that might be experienced as an event that is not necessarily".
What is the basic principle of insurance?
There are 6 basic principles that must be met in the insurance world, namely: insurable interest, utmost good faith, proximate cause, indemnity, subrogation and contribution.
Insurable interest
Right to insure arising from a financial relationship, between you and the subject matter insured and can be legally recognized.
Utmost good faith
An action to disclose accurately and completely, all facts material (material fact) about something that would be insured, whether requested or not. For instance: honestly insurer must clearly explain everything about the extent of the terms / conditions of the insurance, and you also have to provide a clear and correct for objects or interests of the insured.
Proximate cause
Means the active, efficient cause of events which lead to a result, without the intervention began and actively from new and independent sources.
Indemnity
A mechanism in which the insurer to provide financial compensation to put you in a financial position that you had prior to the loss (Commercial code article 252, 253 and confirmed in article 278).
Subrogation
The transfer of rights requires of you to the insurer after a claim has been paid.
Contribution
The right insurer to invite other insurance companies to equally bear, but it does not have the same obligations to you in providing the indemnity.
Why do we need insurance?
Insurance has a main benefit insured financial position (CS) as it was before the loss. But besides that, insurance can also reduce the uncertainty of risk, can reduce the financial burden due to the losses that come suddenly, giving the feeling of security, and many other benefits.
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