What is Microinsurance and its Benefits? Know More

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Insurance in Indonesia has been around for a long time. Not only life insurance, health, vehicles are popular. But there are still many types of insurance. Insurance is synonymous with the upper middle class. Because most of the premiums that must be paid cannot be reached by the lower middle class.

But don't worry, it's not impossible for the lower middle class to have insurance. There is BPJS Health and Employment which turns out to be very affordable to ensure public health. In addition, there are also micro insurance products. What is microinsurance? Usually anything that has the word "micro" means small. Then what is micro insurance and its benefits for the wider community? Read on for this article!

Definition of Microinsurance

Microinsurance is insurance that functions to provide protection to low-income people from the general risk of loss that they will later face. The product of microinsurance itself has a policy, administrative process, and features that are simpler than ordinary insurance.

Therefore, microinsurance can be easily understood by the public. low-income people in Indonesia means people who have an income of no more than IDR 2.5 million per month. even the premiums start from IDR 10,000 to IDR 50,000.

Low-income households and micro, small and medium enterprises are particularly vulnerable to risks, whether related to health, agriculture, property or death. These risks often carry severe financial implications when individuals, businesses, and households attempt to manage them. Since very few of these groups have access to formal risk management and efficient and effective social protection mechanisms, recovering losses and recovering from shocks is the most difficult, and more often impossible.

Microinsurance provides a means for poor and low-income households to protect themselves from the effects of risk. Therefore, the role of microinsurance and its benefits must be seen in conjunction with the provision of basic health services, employment and government education, etc., all of which lead to poverty alleviation.

There are many microinsurance schemes around the world today, but they still cover a small part of the overall need. It is difficult to estimate how many people are still insured or not sufficiently insured against risk. According to the Global Findex Database one in two billion people were unbanked in 2014. The number of people without or inadequate insurance is even greater.

Although microinsurance schemes have become self-sustaining, many are still dependent on receiving critical support in the form of grants and technical assistance. For microinsurance to be successful for policyholders and insurance companies, several elements are key.

These include simple and affordable insurance products that reach large numbers of people, efficient administration and payment of premiums, simplified claims management, and fast benefit delivery. All important to provide “real value” to the target client.

Microinsurance and its benefits can also be a tool for extending social protection in the context of providing security to populations in developing countries and contributing to poverty alleviation. Overall, strategies and mechanisms should ensure that microinsurance is not approached in isolation, thereby maximizing impact.

The claim payment is even immediate, i.e. the claim must be made immediately so that the policy owner can immediately get compensation. The process should also be faster than regular insurance. Because this is intended for people with low incomes, this claim fund may be needed especially if the person does not have savings. There are many forms of microinsurance. Some of them are life insurance, health insurance and loss insurance.

Benefits of microinsurance

After getting to know the meaning of microinsurance, then we will discuss the benefits that can be obtained with this microinsurance. Benefits are generally almost the same as ordinary insurance such as:

• Get compensation for funeral expenses
• Payment of outstanding loan/credit debt to credit provider
• Construction compensation for houses after disaster/fire
• Compensation for crop failure caused by natural disasters
• Payment of hospitalization costs
• Income replacement compensation
• Compensation died to the heirs
• Compensation for disability due to accident
• Compensation for operating costs

By looking at all the benefits that can be obtained from micro insurance, it can be said that even though the insurance is micro, the benefits obtained are macro benefits. But keep in mind also yes that these benefits vary according to the provisions of each insurance company.

So, what are the features of this microinsurance? I'm sure a lot of people are curious. Its features are actually not too much different from ordinary insurance features. Check below.

• Insurable objects and risks

There are several objects that can be insured like ordinary insurance, namely the life, property or interests of participants. There are also many risks that can be insured, such as loss of property or financial loss, disability, illness and even death.

For the object of interest of the insured participant, the risk is the loss of interest which is all guaranteed in the insurance policy. Microinsurance can not only provide protection with one type of risk. Protection against one risk can also be combined with other risks so that the benefits are maximized.

• The value of coverage

The coverage value that can be provided by micro-insurance companies is indeed not as large as the value of ordinary insurance coverage. Of course this is intended so that the company does not collapse as well. Just imagine if the micro insurance premium that must be paid is only IDR 50,000 per month but the coverage value reaches hundreds of millions of rupiah, then micro insurance might go bankrupt.

Therefore, according to the rules in the Grand Design for the Development of Indonesian Microinsurance, they agreed to provide micro insurance coverage that should not exceed Rp. 50 million.

• Determination of premium amount

In determining the amount of micro insurance premiums, the reference is the fulfillment of their daily needs. If this can be fulfilled then the premium can be paid according to ability. Micro insurance itself has a maximum of IDR 50,000 per month.

• Premium payment

Like other insurance, the method of payment of insurance premiums can be paid directly to the insurer or the insurer, or it can be through an agent or intermediary. This applies if it turns out that the insurance office is far from the participant's area.

• Police

Every insurer is required to issue a policy. In this policy there are many terms and conditions of insurance. The same is true for microinsurance. But this micro-insurance policy is more concise and the language is easy to understand for low-income people so that there is no misinterpretation. The micro-insurance will also issue a sign that the person has purchased micro-insurance in the form of an insurance certificate.

• Underwriting

This underwriting will be implemented based on the concept of microinsurance which is simple, easy, economical and immediate.

• Claim

The ease of filing a claim is also the basis of microinsurance. In the claim, participants must meet only 4 types of documents for personal data. This microinsurance will also pay compensation no later than 10 days from the date of filing a claim.

From all the explanations of micro-insurance and its benefits, let's also identify micro-insurance products now which are also widely known among the public. this is an example.

1. Yes Peci

This is a life insurance that provides benefits to the heirs in the form of compensation for mourning money of Rp. 5 million if the policy owner dies due to illness. However, if the owner of the policy dies due to a traffic accident, the compensation for mourning will be Rp. 25 million.

2. The Wise

The Wise Insurance provides protection to the public against the risk of death due to illness, funeral compensation, loss of income due to fire, natural disaster, robbery and theft. This insurance adheres to the sharia system in accordance with Islamic teachings.

3. My legacy

The next micro insurance is my Heritage which is categorized as life insurance. The benefits that can be obtained from my inheritance are compensation for mourning money of Rp. 10 million for the insured who dies due to an accident. If the insured dies due to illness, a funeral fee of IDR 500,000 will be added.

4. My house

This is a micro insurance that guarantees protection for houses and buildings of business from the risk of loss and damage due to lightning explosions, plane crashes, fire, smoke and death. The fire compensation will be given to the building owner in the amount of Rp. 5 million, for the tenant of the building, Rp. 500,000 and the funeral money of Rp. 5 million which will be given to the heirs.

5. Stop the Eruption Effort

This insurance still provides protection for places of business such as kiosks, carts, stalls, baskets, motorcycles, bicycles used for business. In addition, this insurance also provides protection for business capital or merchandise. The risks covered include lightning explosions, fires, plane crashes, riots, smoke, volcanic eruptions and being hit by vehicles.

6. Stop Earthquake Business

It is almost the same as the Stop Business Eruption micro insurance which provides protection to the place of business and merchandise at the place of business. The risk that is guaranteed is the same, only added the risk due to an earthquake.

So that's an explanation of microinsurance and its benefits for the wider community. To be able to get this maximum benefit, we must also be careful in choosing micro insurance. The things below we should pay attention to. What the hell? Let's see below.

• Recording the micro-insurance products that we will buy
• Take note of the contract number or policy number
• Record the validity period of the microinsurance so you don't miss it if you want to claim it
• Always pay dues/premiums on time
• Take note of the insurance company's customer service number to get an immediate explanation when someone doesn't understand
• Complete the documents when submitting a claim correctly so that the process is also fast

Insurance is not always expensive and only for the wealthy. The proof is now many insurance companies play in the lower middle class. This is intended so that all levels of society can feel protected also against the risks that may occur. So plan to always protect our assets and ourselves.

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