Get to know more about what insurance premiums are and what are the benefits

Insurance premiums are the amount of fees that must be paid by the customer. In general, premium payments are made every month, but there are also insurance premiums that are paid once. Each customer has a different premium fee depending on several things. Many people think premiums and insurance policies are the same, but each has its own meaning.

Everything related to the premium is mutually agreed upon by the customer and the insurance company. This is clearly stated in the policy. In simple terms, a policy is an agreement document agreed upon by the customer and the company.

After knowing what an insurance premium is, let's continue to discuss the types of premiums, the function of the premium and how it is calculated.

Types of Insurance Premiums

Travel Insurance Premiums

This premium guarantees financial protection when customers travel, both domestically and abroad. Travel insurance premiums are suitable for business people with high mobility.

Travel insurance premiums are only paid once, namely when the customer buys a plane ticket.

Personal Accident Insurance Premium

The second type of premium is a fee that needs to be paid by the customer to get protection from various risks in the event of an accident. This premium is important for those of you whose activities outside the house are hectic.

In general, personal accident insurance is divided into premiums for protection during holidays and protection when you have an accident.

Health Insurance Premiums

As the name implies, this premium guarantees customer health protection. When you pay a health insurance premium, all medical expenses will be borne by the insurance company if you get sick at any time.

The amount of medical expenses borne depends on the insurance product chosen and how much the premium is per month. This solution is definitely more cost-effective than paying for your own medical expenses, which are increasingly expensive.

Purpose and Function of Insurance Premiums

Just like other insurance components, premiums also have several functions and purposes why customers need to pay for them.

For Customers (Insured Party)

Obtaining Protection Guarantee

The function of insurance premiums paid by customers will protect them from various kinds of dangerous risks. After routinely paying premiums, your safety is automatically guaranteed by the insurance company.

Because we never know when bad things can happen and how much loss they can cause, insurance products emerge. The goal is to help minimize customer losses when experiencing unwanted things.

Risk Transfer

Not only guaranteed protection, premiums also help customers transfer various types of risk of loss that may occur to the insurance company. If you don't pay the premium, then you yourself have to bear the loss.

As the insurer, the company is obliged to pay a certain amount of compensation for losses suffered by customers. This compensation can be in the form of compensation or money.

Reduce Costs

Every month, you need to pay a premium with a certain nominal. When you experience a disaster, the money paid is used to cover other costs. So, it can reduce or equalize costs when experiencing risk.

For example, you are free from hospital fees when you are hospitalized because you have regularly paid health insurance premiums.

For Insurance Companies

Fundraising

Insurance premiums paid by customers will be managed and developed by the company. The proceeds from fund development can be used to pay compensation whenever a customer experiences an unexpected and detrimental event.

During the fund management process, this can benefit the insurance company.

Balancing Insurance

The insurance company's duty is to regulate in such a way that the risks borne and the customer's premium payments are balanced. Thus, both parties benefit from the agreement.

In general, the premium amount is determined by the premium rate multiplied by the sum insured that the customer chooses. This provision applies to other insurance except life insurance.

Meanwhile, life insurance determines the amount of the premium according to the provisions or agreements of the insurance company.

Factors Affecting Calculation of Insurance Premiums

Below are several factors that determine the size of the premium, such as:

Type of goods insured (goods or life)

The condition of the goods when insured, whether they need maintenance or are they still good

The type of transportation to transport the insured goods

How to arrange and store goods during the transportation process