Know Your Insurance Definition

Understanding Insurance 

As we have seen one of them how to control risk by insuring a risk to the insurance company. this is considered one of the most important methods in an effort to cope with risk. Therefore many people who argue that risk management with insurance. In fact circumstances which actually is not.

Insurance coverage is a transaction, involving two parties, the insured and the insurer. Where the insured is guaranteed by the insurer, the insured will receive reimbursement of any loss which might be experienced, which is the result of an event which was originally not necessarily going to happen or who previously could not be determined when / when the loss. performance contracts oblige the insured had to pay "premium" that is to pay some money to the insurer, which few per cent of the amount of insurance coverage.
From various angles, insurance has the purpose and techniques of various solutions, among others:
a. In terms of economy, then:
The goal:
reduce the uncertainty of the results of the work done by a person or company in order to meet the needs or achieve goals.
Technique:
by transferring risk to other parties and other parties combine a number of risks large enough so that it can be estimated with more precision the magnitude of potential loss.
b. In terms of law, then:
The goal:
transferring the risks faced by an object or a business activity to another party.
Technique:
through payment of premiums by the insured to the insurer in the compensation contract (insurance policy), then the risk is transferred to the insurer.
c. In terms of the Rules of Commerce, then:
The goal:
share risks to all insurance program participants.
Technique:
transfer of risk from an individual / company to a financial institution engaged in risk management (insurance companies), which will divide the risks to all participants who handled insurance.
d. In terms of the Community, then:
The goal:
bear the losses jointly among all insurance program participants.
Technique:
all members of the group (group members) insurance program to contribute (in the form of premiums) to sympathize loss suffered by one / several of its members.
e. In terms of mathematical, then:
The goal:
predict the possible occurrence of risk and prediction results were used to divide the basis of risk to all participants (a group of participants) insurance program.
Technique:
calculating the likelihood based on probability theory ("Probability Theory"), conducted by the actuary and the underwriter.