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Monday, August 22, 2011

[Part 1] Let Us Know The Basic Insurance

Communities in developed countries are very familiar with insurance, but otherwise not so with people in poor and developing countries. Most people lack an understanding of insurance issues, It related with majority of people are relatively low level of education and high rate of poverty so that this issue received less attention except among the educated and middle to upper social class. In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.

Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment.

An insurer is a company selling the insurance;

An insured, or insurance policyholder, is the person or entity buying the insurance policy.

The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium.

Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring.

In order to be insurable, the risk insured against must meet certain characteristics in order to be an insurable risk. Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses.

Characteristics of insurable risks

Risk which can be insured by private companies typically share seven common characteristics.

  1. Large number of similar exposure units. Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses. Exceptions include Lloyd's of London, which is famous for insuring the life or health of actors, actresses and sports figures. However, all exposures will have particular differences, which may lead to different rates.

  2. Definite Loss. The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.

  3. Accidental Loss. The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.

  4. Large Loss. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.

  5. Affordable Premium. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance.

  6. Calculable Loss. There are 2 elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.

  7. Limited risk of catastrophically large losses. Insurable losses are ideally independent and non-catastrophic, meaning that the one losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Capital constrains insurers' ability to sell earthquake insurance as well as wind insurance in hurricane zones. In the U.S., flood risk is insured by the federal government.
    In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

[Part 2] Let Us Know The Basics of Insurance

Insurance marketer, usually called insurance agent or financial consultant, is an unpopulair profession in Indonesia. The most of people lack an understanding of insurance issues, especially outside the developed countries. It related with majority of people are relatively low level of education and high rate of poverty so that this issue received less attention except among the educated and middle to upper social class.

The profession of agent insurance promises unlimited income and insurance industry grows rapidly. One day maybe you will be interested with this job. Perhaps in the near future you want to purchase car insurance or home insurance, property insurance etc. It's OK. I think, you should know 10 [ten] issue about insurance, like bellow :

1.   What is a Risk?
Risk is a possibility of adverse results arising from any occurrence. Therefore Risk arises out of uncertainty. In Insurance the term risk is used to mean either a peril to be insured against (fire is a risk to which property is exposed) or a person or property protected by insurance, (miners are not considered as good risk for accident insurance).

2.   What is an Insurance?
insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.

3.   What is a Policy of Insurance? 
Policy of Insurance is The formal contract issued by an insurance company [called "insurer"] that contains terms and conditions of the insurance cover and serves as its legal evidence.

4.   What is a peril?
A peril is the cause of loss in a situation i.e. fire, storm, flood or theft etc. By taking an insurance cover, one protects himself or his property against certain perils.

5.   What is a cover note?
It is not always possible on the part of the Insurance Company to issue an actual policy document immediately as soon as the proposal is signed and premium is paid. There may be a need for the insured to prove that the cover is in force,for instance in motor insurance, there is a legal requirement. In such cases as a temporary measure, a document which is known as 'cover note' is issued to the insured which briefly gives the details of the cover. Subsequently, cover note is replaced by the policy document.

6.   What is utmost Good Faith?
This is one of the basic principles of insurance. When a person comes to the Insurance Company for any Insurance, he knows everything about the property or the person to be insured whereas the insurance company knows nothing. Hence it is the duty of the insured to make a full disclosure to the insurance company without being asked of all material circumstances. This is expressed by saying it is a contract of the utmost good faith.

7.   What is insurable interest ?
The existence of insurable interest is an essential ingredient ofany insurance contract. In an insurance contract, it is not the house or machinery or the ship that is insured, but it is the pecuniary interest of the insured in that house, machinery or shop etc. which is insured. The insured must stand in a relationship with the subject matter of insurance whereby he benefits from its safety or well-being and would be prejudiced by its loss or damage. And this relationship must be recognized by law.

8.   What is indemnity ?
'Indemnity' for the purpose of insurance contracts, is a mechanism by which insurers provide financial compensation sufficient to place the insured in the same financial position after a loss as he enjoyed immediately before it occurred. In layman's language, if your old property is totally damaged or lost, insurance company will normally, reimburse the present market value of the old property and not the value of a brand new property of similar nature. But there are certain exceptions to this principle.

9.   What is reinstatement ?
As a method of providing indemnity, reinstatement refers to property insurance where an insurer undertakes to restore or rebuild a building or piece of machinery damaged by any specified perils or by breakdown under an engineering policy.Under a 'reinstatement value policy' if the SI is chosen for the new value of the property, in case ofa loss, the insured can be reimbursed the current replacement value of the property without any deduction for wear and tear or depreciation.

10.   What is Sum Insured ?
Sum Insured is the value for which a property or a person is insured. There is no system which makes you to determine the exact value of property to be insured. In fire insurance or engineering insurance,, insured has the option to select the new replacement cost of the Building / Property or machinery as the Sum Insured and in case of a loss, they may get reimbursed the said cost under the principle of "new for old".For covering a person, there is no set formula and the insurance companies (insurers) normally accept maximum 3 to 5 times of annual income of the person as the Sum Insured under accident policy.

Thursday, August 18, 2011

The IIHS's mission is to reduce losses - deaths, injuries and property damage – due to crashes

IIHS HLDI 4 takaful car insurance breakdown cover cheap The Insurance Institute for Highway Safety (IIHS) has been a leader in finding out what works and doesn't work to prevent crashes in the first place and reduce injuries in the crashes that still occur for over 30 years. The IIHS is an independent and non-profit organization as well as a scientific and educational organization wholly supported by insurance companies in US dedicated to the mission of reducing the losses - deaths, injuries and property damage - from crashes on the US national highways. In it's official website  IIHS is based on :

Insurance Institute for Highway Safety
1005 N. Glebe Road, Suite 800
Arlington, VA 22201 USA
tel 703/247-1500
fax 703/247-1588.

The Vehicle Research Center (VRC) was opened in 1992. This center, which includes a state-of-the-art crash test facility, is the focus of most of the Institute's vehicle-related research. The Institute's affiliate organization, The Highway Loss Data Institute gathers, processes, and publishes data on the ways in which insurance losses vary among different kinds of vehicles. The Institute's research focuses on counter-measures aimed at 3 factors (human, vehicular and environmental) and on interventions that can occur before, during, and after crashes to reduce losses.

The Highway Loss Data Institute (HLDI) carry out the IIHS's mission to reduce losses - deaths, injuries and property damage – due to collisions on the US highways. HLDI share and support the mission through the study of data that represent the human and economic losses as a consequence of ownership and operation of various types of vehicles. The HLDI is a non-profit public service organization that closely associated with and funded through the IIHS which is totally supported by auto insurers

Highway Loss Data Institute
1005 N. Glebe Road, Suite 700
Arlington, VA 22201 USA
tel 703/247-1600
fax 703/247-1595

The HLDI shares and supports the mission through the study of insurance data that represent the human and economic losses as a consequence of ownership and operation of various types of vehicles. The HLDI also publishes data reports on the ways losses vary among different kinds of vehicles and analyzes the cost to insurance companies from theft, collision, and injury claims as they relate to cars. 

I suppose that's useful if both are adopted in Indonesia. The mission is to reduce losses  — deaths, injuries, and property damage — from crashes. Certainly carrying out of the mission is very good for insurance industry. In the long run  IIHS and HLDI will be able to reduce claim losses. Eventually the insurers will be able to provide service better.

For general inquiries, see http://www.iihs.org/

Sunday, August 7, 2011

All About Contractor’s All Risk Insurance **

Let talk about Insurance. If you interested of insurance business especially in general insurance, I think  you might be also want to know about  :

CAR insurance

CAR Insurance Policy Contractor’s All Risk insurance or CAR insueance that covers all risks associated generally with construction project. Issued commonly under the joint names of a contractor and a principal (client), it usually also includes public liability insurance.

Read more »

Friday, June 24, 2011

Insurance benefits : Making Financial Recovery is Possible

I think we totally agree if someone say that Insurance makes economic recovery possible for victims of earthquake catasthrope in Chili, New Zealand and Japan. Economic recovery will be more fast if the risks are coverage with insurance. It’s so much better than not having anything at all. The above statement is all right.

The catastrophic earthquake in Japan, Mart 2011, made the insurance industry swallow loss more than US $ 35 billion. The catastrophic earthquake in New Zealand make insurance claims approximately NZ dollar 11 billion in February 2011.  The catastrophic earthquake that struck central Chile in April 2011 is estimated to have caused billions of dollars in insured and economic losses. Insured losses are being estimated between U.S. $2 billion to $8 billion and total economic losses may cost between U.S. $15 billion to $30 billion.

image If it wasn’t for the highly developed insurance market in Chile, economic recovery would be much more difficult. In addition to a number of its own insurers, Chile also has many large international insurers and reinsurers (mainly American and European) that will provide the financial resources necessary for Chile’s reconstruction, according to the Insurance Information Institute (III).

That makes Chile’s situation much different from Haiti’s, which was struck by a devastating earthquake on January 12. Haiti has almost no private insurance market.

According to III, direct premiums written in Chile in 2008 totaled roughly U.S. $5.8 billion. Of that, nonlife (i.e. coverage on homes, businesses and vehicles) insurance premiums accounted for U.S. $2.3 billion and life premiums U.S. $3.5 billion. By contrast, in Haiti, estimated total nonlife premium income written in 2008 was $19 million. Makes you wonder how different recovery would be for Haiti if it had a stronger insurance market.

Unfortunately, the benefits of insurance are often seen only after a disaster strikes. While no amount of money can ever make up for loss of life, insurance makes it possible for survivors to rebuild their lives. I often hear people complain about paying for insurance – saying it’s a waste of money. But it’s situations like these that remind us why insurance exists. Insurance business really give more benefits for insurance industry - insurance companies - and insurance policyholders each other. Insurance business makes economic recovery more faster and financial business more lively. Insurance services is rational needs for anticipating any catasthrope, disaster and accident.

We suggest you to buy any insurance according to your requires and how much money do you have for buying insurance.   

Wednesday, June 15, 2011

Explanation of Contractor's All Risk Insurance

The Meaning Contractor's All Risk Insurance

CAR insurance

CAR Insurance is the insurance policy that covers all risks associated normally with a construction project. Issued commonly under the joint of a contractor and a principal (client), it usually also includes public liability insurance.

This article is a continuation of the first part of Contractor's All Risks Insurance and acted as an additional explanation. In the previous already alluded to the definition of Contractor's All Risks Insurance or CAR insurance along with a brief description and overview of the contents of the CAR insurance policy. So in this advanced section provide additional information and a more detailed explanation of the first part.

Risks (in Insurance), it means Situation where the probability distribution of a variable (such as burning down of a building) is known but its mode of occurrence or actual value (whether the fire will occur at a particular property) is not. A risk is not an uncertainty (where neither the probability nor the mode of the occurrence is known), a peril (cause of loss), or a hazard (agent or condition that makes the occurrence of a peril more likely or more severe). 

Risks in general, it means, probability or threat of a damage, injury, liability, loss, or other negative occurrence, caused by external or internal vulnerabilities, and which may be neutralized through pre-mediated action.

Policy (in Insurance), it means formal contract issued by an insurer that contains terms and conditions of the insurance cover and serves as its legal evidence. Formal contract is contract made legally enforceable by following a prescribed format, and by incorporating standardized conditions and provisions in its body. Insurance company that issues a particular insurance policy to an insured. In case of a very large risk, several insurance companies may combine to issue one policy.

Project it means planned set of interrelated tasks to be executed over a fixed period and within certain cost and other limitations.

Construction, in general, it means works of clearing, dredging, excavating, and g  rading of land and other activity associated with buildings, structures, or other types of real property such as bridges, dams, roads.

Contractor means Independent entity that agrees to furnish certain number or quantity of goods, material, equipment, personnel, and/or services that meet or exceed stated requirements or specifications, at a mutually agreed upon price and within a specified timeframe to another independent entity called contractee, principal, or project owner.

Principal in contracting or in insurance, it means a client who awards a contract to a contractor for completion of a job or project in accordance with terms of the contract. Also called owner.  Client in general inusrance, it means customer of a professional service provider, or the principal of an agent or contractor.

Liability Insurance is insurance policy that covers civil liabilities to third parties, arising from bodily injury, property damage or other wrongs due to the action or inaction of the insured. It covers only civil liabilities and not criminal liabilities.

What can be insured on a construction project

Project work in accordance with the contract, typically, include  :

1.   Main work

2.   Preparation work

3.   Temporary work

4.   Contractor's plant and equipment :  Great tools and other machineries used in
      the implementation of the work

5.   Third party liability  :  It covers disability / death / hospital expenses and third
      party property damages

6.   Material handling on-supply by the owner (Principal)

7.   Damage and or loss during the maintenance period

8.   Cost of clearance of debris

9.   And others.

Motorcycle Insurance Plus LIFE INSURANCE

imagePopulation of motorcycles and other motor vehicles in Jakarta increased rapidly, while highway congestion getting worse because almost no new highway length added. The risk of accidents was even greater. Then the motorcycle insurance is no longer sufficient if only to otorcycle alone. Motorcycle insurance with a label name Takaful Anshor added benefit of death.


PICT0031Takaful insurance company offers 2 types of motorcycle insurance. The first namely Standard Motorcycle Insurance is pure motorcycle insurance without any additional, It cover Total Loss Only due to a theft case or an accident caused more than 75% of destruction level. Rate premium for standard motorcycle insurance is 1.25%. The second type of motorcycle insurance we offered is Takaful ANSHOR. The product will replace total loss only due to a theft case or an accident with additional life insurance or Personal Accident insurance for compensation of death.  

A Takaful insurance product for motorcycle with coverage warranty risk of total loss caused by theft case or accident with additional compensation for death due to an accident or died NOT because of an accident (Life Insurance).


Membership Terms Motorcycles Insurance


For Personal ownership in accordance with the Participant's name or vehicle registration in accordance with the receipts purchasing of the motorcycle except for ownership by Business Entity


Use for Personal, Office, Institution, business company and not leased or for motorcycle taxis

3. Maximum age of 7 years and a maximum sum insured of Rp. 50,000,000.

Insurer is only obligated to pay a death benefit to a policy (no multiplier) if the Participant has more than one policy.

Calculation of Insurance Premium :

1]   Takaful Anshor [Extended motorcycle insurance]:

Rate Premium          :   2.50 % 
Occupation              :   Motorcycle  YAMAHA MIO SOUL issued year of 2010 
Sum Insured            :   IDR  13.000.000,- 
Basic Premium        :   IDR  13.000.000  x  2,50%         =  Rp. 325.000 ,- 
Annual premium paid                                              =  Rp. 325.000 ,-

2]   Standard Motorcycle Insurance :

Rate Premium          :   1.25 % 
Occupation              :   Motorcycle  YAMAHA MIO SOUL issued year of 2010 
Sum Insured            :   IDR  13.000.000,- 
Basic Premium        :   IDR  13.000.000  x  1,25%         =  Rp. 162.500 ,- 
Annual premium paid                                               =  Rp. 162.500 ,-

Biker need motorcycle insurance

    Insurance benefit :

* Total Loss Only due to a theft case or an accident

     Additional personal accident and life insurance :

* Death compensation is due to an accident  IDR  10.000.000,-

* Death benefit is NOT due to accident  IDR  5.000.000,-


How to Insure?

Information  :
Phone / SMS     :   +62 815 8525 9555 
Email                 :    yusuf.edyempi@yahoo.com

Takaful insurance company

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