Definition, functions, features and purpose of insurance

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Start this article with a definition of what insurance is. This term implies a specific type of economic relationship that provides insurance protection to organizations or individuals from various kinds of dangers. This article will discuss the functions of insurance, its goals and types.

Essence

As you know, any kind of economic relationship carries with it certain risks, because there is always the possibility of losing your finances. So it is precisely the possible danger that is included in the concept of "risk".

From an economic point of view, risk is the future probability of an event with negative outcomes. It is the unfavorable outcome of the risk that is expressed with the help of damage. Many companies and organizations try to get compensation in the event that adverse conditions do occur, given the risk factors.

It can be concluded that the essence of insurance is the creation of insurance funds that exist at the expense of contributions from participants in the insurancecompanies. If an accident occurs, the insurance agency will pay a certain amount of money to the injured party.

Main functions of insurance

Insurance activity, as a rule, does not create anything new. It exists due to the distribution of funds contributed by the members of the insurance company.

First of all, insurance performs a distributive function and pays financial compensation in case of negative risk conditions. It is the distributive function that ensures the process of continuity at all stages of insurance.

The risky function is able to provide material protection against various negative random events that lead to material losses. Each insurance participant makes certain contributions that will not be returned to him after the end of the current contract.

Insurance also has a preventive function. Its implementation is carried out by reducing the degree of risk and bad consequences of any insured event. This function will be carried out thanks to the financing of funds for measures to prevent, limit and localize the bad consequences of accidents, catastrophes or accidents. In order to be able to implement this function, it is necessary to create a special insurance fund.

Insurance also has a savings function. This suggests that members of the insurance fund will have the opportunity to save sums for survival through insurance. This kind of savingswas caused by the need to protect the already achieved family we alth.

The investment function allows insurance participants, if there are free amounts, to invest them in the fund of an insurance organization and receive profit from the activities of this company.

Insurance also performs a credit function. We are talking about the return of insurance premiums.

The control function is to form the right fund and to use the money coming into it for the intended purpose.

Purpose of insurance

The main purpose of insurance is to protect the persons who form the insurance fund. The more people a company can attract, the more capital it has. So, the purpose of insurance is to be able to meet the public need for high-quality and reliable insurance protection against all kinds of negative accidents.

If we take into account the macroeconomic position of insurance, then its purpose can also be called the accumulation of funds that were paid by the participants of the insurance fund, as well as the investment of these funds in the economy. Correctly chosen purpose of insurance and will be able to determine its effectiveness. To quantify, you can use the coverage of insurance coverage of customers exposed to risks, as well as the coverage level for each of these risks.

Compulsory insurance

The purpose of compulsory insurance is to provide compensation for damage that was caused during transportation to the property and he alth of passengers. It does not matter which transport andtype of transportation were used. In this case, uniform insurance conditions have been created for all clients, as well as the condition for paying funds to victims.

Compulsory insurance exists on the principle of guaranteed compensation for harm received during transportation by any means of transport. All insurance payments are made at the expense of insurance compensation or at the expense of compensations established by the law of the Russian Federation. At the same time, the amount of damage caused and the method of its compensation is determined regardless of which transport was used.

Social Security

The main task of social insurance is financial support for those categories of insured persons who, due to certain circumstances, have lost their ability to work.

Therefore, there are such goals of social insurance:

• ensuring the payment of temporary benefits to the disabled category of the population;
• payment of cash to disabled people due to certain types of diseases;
• carrying out payments on birth certificates;
• providing cash payments to mothers caring for young children;
• financial support providing benefited persons during spa treatment;
• payment of financial benefits at the birth of a baby;
• also social assistance to people with disabilities in the acquisition of prosthetic structures, rehabilitation facilities and equipment for the disabled.

The objectives of compulsory social insurance are determinedstate. This is done to help a disabled group of people.

There is a breakdown of expenses for the purpose of compulsory social insurance. This document must be completed by persons who want to receive social insurance from the state. If you belong to the disabled category of the population, then the state will definitely help you.

He alth insurance

This type of insurance is the main form of public he alth protection.

He alth insurance is a combination of several types of insurance that provide full or partial payments to insured persons for various medical services.

The main purpose of he alth insurance is to guarantee citizens the right to receive medical care in cases of illness, at the expense of the funds accumulated by the fund.

Pension insurance

Pension insurance is the material security of citizens upon the onset of retirement age. This type of insurance can be of two types: state and non-state.

The first of them is fully guaranteed by the state, and the order of receipt is subject to full legal control, and the second can be concluded in a wide variety of options, taking into account all the nuances.

The goals of pension insurance are to ensure that the elderly are provided with a decent level oflife. Ideally, the difference in receiving funds during working and retirement hours should not be very noticeable.

Insurance principles

Like any other activity, insurance has its own principles. So, the principle of equivalence is very important, which should be to maintain a balance between the costs and incomes of the insurance company. Of course, risks can threaten many people, but in fact, not all of them lead to the occurrence of an insured event.

Insurance payments for each case will be made only at the expense of contributions from other participants in this organization who were able to avoid insurance risk.

The principle of chance is also inherent in insurance. This suggests that only those events that are inherent in the sign of probability and chance can be insured.

Insurance Tasks

The purpose and objectives of insurance involve the activities of the insurance organization itself. The main tasks will be the mandatory presence of some factors, namely:

• ensuring social protection for the insured segments of the population, as well as the mandatory implementation of all payments specified in the contract;
• participation in supporting the financial stability of the he alth care system;
• Protection of interests related to the preservation of property of legal entities and individuals.

For the proper implementation of all goals and objectives, each insurance company is controlled by government agencies.

Main typesInsurance

As mentioned above, the purpose of insurance is to protect the persons involved in the creation of the insurance fund. In this case, the goal remains unchanged for any method of insurance.

Let's consider what types of insurance exist:

1. Private. In this case, the object of insurance is personal interests related to he alth, life, ability to work and pensions. These include life, accident and he alth insurance.
2. Property. In this case, we are talking about the presence of property interests associated with the use and possession of certain property. This includes insurance against fires, natural disasters, and damage to property.
3. Liability insurance. Here, the insurance object will be considered liability to other citizens or organizations. This type of insurance will serve as reliable protection against potential harm to he alth or property belonging to other citizens or organizations.
4. Entrepreneurial risks. The object is property interests that are associated with compensation for losses or lost income in the course of business activities. These include deposit insurance, default risk, financial guarantees, export credits.

Conclusions

In order to succeed in any kind of activity, you need to consider what risks may accompany you. Choosing the right insurance company will provide you with reliableprotection.