• Skip to main content
  • Skip to primary sidebar
  • Home
  • Compare Car Insurance Online!
    • Comprehensive Car Insurance
    • Mileage Based Car Insurance
    • Third Party Car Insurance
    • Third Party, Fire & Theft Insurance
  • Insurance
    • Insurans Kereta Online
    • 马来西亚车险
    • Motor Insurance
    • Motorcycle Insurance
    • Medical Card

What Is Insurance And How Does It Work?

Hariz / 16/02/2018

What is insurance and how does it work? Well, the concept of insurance started way back during the age of exploration, when merchants ship goods from “a far-far-away land” and sell it for huge profits. Unfortunately, shipping back then were mainly made up of wooden ships and human labour, and hence goods were often damaged in the process.

Eventually, merchants gathered together and came up with a solution to minimise their losses – “risk sharing.” In short, this method requires a group of merchants to divide their shipments among each other’s ship, and agree to share any losses if anything bad happens.

So when 1 ship is destroyed, each of them stood to only lose a small portion.

Let’s look at the comparison below to better understand this concept of what insurance is and how it all works

Bringing this concept to today, we who pay for insurance are like the group of merchants who agreed to share risks and losses. In other words, we “crowdfund” each other on our misfortunes.

Insurance In The Modern World

Unfortunately, “risk sharing” today isn’t as easy as agreeing through a handshake, and coming out with your own black and white agreement would probably cost a lawyer’s pay.

That’s why Insurance companies exist. Insurance companies act like a mediator, to create insurance contracts (we call it insurance policy), and to use it to govern our “agreement” to risk sharing.

So when someone purchases an insurance, he/she is basically purchasing a black and white agreement that clearly states :

  • Insurance Premium (the price to pay an insurance company, normally on a monthly-basis)
  • Sum Insured (the maximum amount a person can claim from insurance company when something bad happens)
  • Insurance Coverage (a detailed list of what a person can or cannot claim from the insurance company)

Of course, just like any purchase in the world, the amount one pays is reflected on the value that he/she gets. So, the higher one pays for insurance premium, the higher the sum insured will be, or the bigger the insurance coverage will be.

Ultimately, the idea of insurance as “risk sharing” is to protect ourselves, not in a physical protection way, but in a state-of-mind way that when anything happens, we know it’s financially settled.

Anxiety Insurance GIF by People of Earth TBS - Find & Share on GIPHY

Now that you are an expert in knowing what insurance is and how it works, for the next article in the “INS 101” series, we’ll be addressing more of your frequently pondered upon questions on insurance. Stay tuned, and stay safe!

To consult us on insurance, or to thank us for this piece, kindly visit www.policystreet.com or our Facebook Page and send us a Message. Don’t forget to like/follow us!

Primary Sidebar

Search Topic Here

Car Insurance

5 Reasons Not To Drive Without Car Insurance

E-hailing Insurance Add-on: What you need to know

Guide: What To Do If You Hit An Animal While Driving

PrOmilej: The Car Insurance For MCO?

Windscreen Insurance (2021): All You Need to Know!

Bahasa Malaysia

11 Makanan Kucing Terbaik Untuk Bulu Kucing Anda

Makanan Kucing Terbaik Untuk Bulu, Gemuk Dan Anak Kucing Anda!

Antara Doktor Pakar Sakit Puan

Pakar Sakit Puan (2021): 20 Senarai Doktor di Malaysia

Antara Doktor Pakar Sakit Tuan

20 Senarai Doktor Pakar Sakit Tuan di Malaysia (2021)

Apa itu NCD? Panduan untuk Diskaun Tanpa Tuntutan (2021)

15 Rumah Kucing Yang Simple Dan Mudah

15 Rumah Kucing Yang Simple Dan Mudah Dibina Secara DIY

Car Insurance Malaysia

Insurans kereta Online

汽车保险

Motorcycle Insurance

+601 11-684 2590

Get in Touch

Unit D-18-3A, Menara Suezcap 1
KL Gateway, No. 2 Jalan Kerinchi,
Gerbang Kerinchi Lestari, 59200,
Kuala Lumpur, Malaysia

 Call: +60 3-3310 0063

 WhatsApp: +601 11-684 2590

 Email: admin@policystreet.com

Our Company

About Us
News & Blog
Careers
Customer Support
Contact

Products

Life Insurance
Medical Insurance
Car Insurance
Motorcycle Insurance
Medical Malpractice Insurance
Home and Property Insurance
Disability Insurance
Diabetes Insurance
Cyber Insurance
Cancer Insurance
Business and Commercial Insurance

Newsletter

Receive resources & tools that can help you prepare for the future. You can cancel anytime.

Subscribe

PolicyStreet is a Financial Adviser approved by Bank Negara Malaysia Copyright © 2020 Polisea Sdn. Bhd.
Registration No: 201601041144 (1212085-T) All Rights Reserved

Insurans Kereta Online