The social and personal life of every citizen is constantly associated with certain risks. We risk our health, money, movable and immovable property and even our life on a daily basis. From time to time you have to suffer losses.
Not everyone can compensate for losses at their own expense: this requires additional financial reserves. This fact formed the basis for the idea of joint and several compensation for property and non-property damage – this is how insurance arose.
Let’s give a legal definition of this concept.
Insurance is a form of protecting the property interests of individuals and legal entities in the event of certain events at the expense of funds generated by insurance premiums.
The threat of damage always exists, but it is not mandatory. To be insured means to protect yourself and your property from unforeseen circumstances – accidents, illnesses, natural disasters, bankruptcy and other unpleasant things.
Basic concepts in the topic of insurance:
- An insurer is a private or public organization that provides insurance.
- Policyholder – the person who signed the insurance contract and pays insurance premiums.
- Objects of insurance – property, health, life, finances, work ability, etc.
- Insurance policy – a document confirming the fact of insurance.
- Insured event – a situation, the consequence of which is the payment of the sum insured.
- Insurance indemnity – the amount that is paid to the policyholder in the event of an insured event.
Insurance can be compulsory and voluntary. In the first case, a citizen or a legal entity is insured regardless of their wishes. Compulsory insurance is within the competence of state structures: the interests of not only the subject, but also the society are taken into account.
Voluntary insurance is made, as is clear from the term itself, on a voluntary basis. The specific conditions and rules of such insurance are determined by the insurer.
Insurance has certain functions:
- Risk – redistribution of risks between participants in the insurance process;
- Investment – temporarily free insurance funds are invested in the economy, stocks, real estate in order to preserve and increase funds;
- Preventive – part of insurance savings is spent on preventing the occurrence of insured events (for example, measures are taken to reduce damage from fires and floods);
- Savings (survival insurance) – part of the finance is accumulated in insurance funds in accordance with the contract.
In civilized countries, insurance is used for social protection of citizens in the event of disability, illness and the onset of circumstances associated with old and old age.
Let’s consider the main types of insurance, their features, functions and essence.
Type 1. Health insurance
This is a form of protecting the interests of citizens in case of loss of health. Insurance payments are aimed at reimbursing the costs of receiving medical care and other costs associated with a health improvement.
This includes expenses:
- to visit doctors and undergo medical procedures;
- for the purchase of medicines;
- for hospital stay;
- to receive dental care;
- for preventive measures.
In case of loss of health, workers and employees with insurance have the right to count on cash payments in the amount of full earnings for a period of disability up to 4 months.
Health insurance is compulsory and voluntary. In the first case, employers make regular contributions to a government-run insurance fund.
Voluntary health insurance reserves can be formed from contributions from the salaries of the employees themselves. Participants in such programs have the right to count on a higher level of medical care.
Type 2. Accident insurance
The purpose of such insurance is to compensate for damage caused by serious health problems. Employees of industrial enterprises, passengers of railway, water and air transport, military personnel and other categories of citizens are insured against accidents.
In a legal sense, there are three main types of accidents – death, long-term incapacity for work, disability (permanent incapacity for work). A typical example is an occupational injury caused by defective equipment.
Type 3. Property insurance
The object of insurance here is property interest. You can insure both the private property of citizens and state property. The insured are legal entities and individuals.
The sum insured cannot exceed the real value of the property. Personal belongings, cargo, production equipment, buildings, animals and other types of property are insured against damage, loss, breakdown, theft.
Type 4. Auto insurance
Vehicle insurance coverage. Protects the interests of citizens related to the repair and restoration of cars. Insured events are: accident, breakdown, theft, theft and damage caused by third parties during operation.
Type 5. Business insurance
Entrepreneurial activity is inevitably associated with high risks. In times of economic instability, the likelihood of unforeseen expenses and financial losses increases many times over.
Business insurance is, first of all, the protection of an enterprise from various types of losses.
The insurance contract will help compensate for:
- losses associated with forced downtime;
- losses caused by lost investments;
- expenses arising from outstanding loans;
- expenses for lost profits.
The objects of insurance are the company’s finances, material resources and other attributes of entrepreneurial activity.