ENTRE News – It is believed that low financial literacy in Indonesian society has an impact on understanding regarding insurance products which is still very minimal. This is reinforced by data from the Financial Services Authority (OJK) which states that Indonesia’s financial literacy in 2022 will only reach 49.6 percent, even though financial inclusion has reached 85.1 percent.
Financial Advisor and Co-Founder of Purwantara, Aidil Akbar Madjid, many people think that insurance is not important, some even calculate the pros and cons if they don’t claim the premiums they regularly pay.
“I often say on many occasions that having insurance is similar to having a spare tire or spare tire on a car. When we sell a car without ever using the spare tire, do we then feel like we have lost? Of course not. On the contrary, we are actually lucky because it means “As long as we own and drive this car, there has never been an incident that requires us to use a spare tire,” explained Aidil.
“So, what do you actually get by having a spare tire? Nothing other than peace of mind, or a feeling of security and peace that if our tire is damaged on the road, then we don’t need to worry about taking it to the repair shop because it is immediately protected by the spare tire at critical times. ,” he continued.
Similar to a spare tire, insurance also plays a role in providing a sense of calm, namely through the premium amount collected as the nominal protection agreed in the policy, which is then paid to the policy holder Situs Toto (health insurance) or his family (life insurance) when the customer experiences a risk. As a result, your financial condition will always be protected even if undesirable things happen. In fact, said Aidil, solutions to financial risks can be prepared from private funds.
However, if you don’t have sufficient funds and assets, then all the costs of future needs and planning will definitely feel expensive. Especially with health costs which are currently increasing. Aidil gave the example of Diabetes Mellitus as the highest cause of death in Indonesia, costing an average of medical support costs of up to IDR 7.5 trillion from the state health budget in 2022, assuming that each person received protection worth IDR 12.5 million.
Meanwhile, by paying insurance premiums starting from IDR 500 thousand per month, customers can get protection of up to IDR 1 billion. According to Aidil, in the concept and science of financial planning, having insurance or protection needs to be a priority before starting to invest. The reason is, investments can be made in the long term, up to decades, in contrast to life risks which can come at any time.
For example, when someone has just paid off investment funds in installments but then has to face unexpected risks, what often happens is that their financial condition is shaky so that the installments have to be stopped. It is not uncommon for total investment funds to be withdrawn to cover the costs of the risks being faced.
Aidil emphasized that this is why having protection before investing in a financial planning concept is non-negotiable, where a third party is needed to help protect yourself and your family financially.
“In cool language, we move or transfer the risk to another party, in this case the insurance company, by paying a premium as a guarantee of financial protection against unexpected risks. In practice, insurance contracts are established on the basis of the insured party’s trust [policy holder] in the insurer [insurance company],” said Aidil.
Reporting from the Understand Together site, insurance has the principle of good faith or utmost good faith which must be fully upheld by both parties, namely the insurance company and its customers. As for the insurance company, having good intentions means protecting customers and conveying product details as well as possible.
Meanwhile, from the customer’s side, having good faith means buying insurance to cover financial losses and conveying honest information during risk screening before making an agreement.
“The key word is to compensate for financial losses, not seek profits,” said Aidil.
Aidil explained that someone who does not have insurance according to their needs can have an impact on their financial condition. For example, for individuals who do not have dependents, having health insurance is mandatory to support the dreams and financial goals they want to achieve, which will all be destroyed when their health declines.
Meanwhile, for married couples or new families, health insurance is also mandatory for husbands and wives because financial conditions must be truly maintained in order to realize future family plans and achieve other desires.
“Don’t let your financial goals be hampered because of the risk of illness FOR4D which could result in missed installments or delays in regular monthly investments,” said Aidil.
In taking advantage of health insurance, customers can combine BPJS health with insurance from their place of work, and add personal insurance if necessary. For example, if a family member is hospitalized, insurance can prevent the use of savings to pay for medical expenses.
So that when you have recovered, the savings and investments that have been collected can still be used to achieve financial goals without having to worry about hospital treatment costs.
Then for families who already have children, it is mandatory to have health and life insurance. This is because preparing funds for children’s education and future is a priority in the household, even if illness or death occurs which could hinder the future.
In addition, health and life insurance can protect potential financial losses resulting from the risk of illness and death.
“Don’t forget that the function of insurance is to compensate for losses, not to make a profit. So, the mindset of ‘you lose when buying insurance because you don’t claim’ is clearly wrong and violates good faith,” explained Aidil.
“So, use insurance products wisely according to the agreed policy. There are many benefits that can be obtained from an insurance product if we believe in it and understand it and use it according to our needs and risk profile,” he said.