In the financial pyramid, insurance occupies the base position, which is wealth protection to maintain future well-being. The placement of insurance as a top priority is certainly due to the benefits that policyholders gain from insurance.
In this discussion, we focus on the purpose, benefits, and functions of insurance. It would be better if you learn more about insurance by reading the article.
What is Insurance?
Insurance is essentially an agreement between the insurer and the insured. In insurance, the insurer provides coverage or compensation if something happens to the insured party or their property according to the agreed terms.
In short, an insurance company provides compensation to the insured if an unwanted event occurs. Meanwhile, the insured must fulfill their obligation, which is to pay the insurance premium according to the agreement.
The Purpose of Having Insurance
There are reasons why people have insurance. The ownership of insurance aims for the following three purposes:
1. Protecting Life and Asset Protection
When risks such as hospitalization occur, life and assets often become victims. Insurance can protect the life and assets of the insured when such events happen. The insured does not need to sacrifice assets because the insurance company covers the costs of the incident.
2. Providing Financial Protection and Long-Term Security
Many people think that the impact of insurance cannot be felt immediately. In fact, insurance aims to provide long-term financial protection. The insured does not need to worry because finances will remain secure in any condition.
3. **Reducing the Impact of Losses Due to Unexpected Events**
Unexpected events always carry risks, especially financially. Insurance can minimize the impact of sudden incidents so that they do not become more serious. For example, if the insured, who is the head of the family, passes away, the beneficiaries will receive insurance money as their livelihood.
Benefits of Having Insurance
Insurance also brings protective benefits from various aspects of life, not just financial. Aspects such as health, life, even education, and retirement benefit from insurance. See the explanation below.
1. **Financial Protection**
Natural disasters, accidents, and other unexpected events certainly require substantial funds to recover from. Insurance provides financial protection benefits so that the insured can still meet their needs.
2. **Health Protection**
Credible insurance companies have networks with adequate health care facilities. Having insurance means the insured has access to quality medical care, both for inpatient and outpatient services.
3. **Life Protection**
Insurance is also beneficial when the insured, who is a breadwinner, passes away. Beneficiaries will receive compensation or death benefits from the insurance premiums paid by the insured.
4. **Educational Protection**
The high and ever-increasing cost of education is certainly a concern for parents. The solution is that they can open insurance to provide a plan for educational funds protection for their children.
5. **Retirement Preparation**
There is also insurance that provides coverage until the insured decides to stop working for retirement reasons. Insurance provides the benefit of retirement fund preparation so that needs in old age are still met.
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