Insurance: what are they, how do they work?

Insurance is considered, today, a fundamental protection tool for both companies and people in different areas of life and business. In this sense, many organizations and citizens can only mitigate risks, ensure tranquility and avoid losses or damages with the help of this type of contract.

Among the first dictionary definitions of the term safe, we have “firm, unshakable, assured, confident, certain”. Therefore, it is not by chance that we also call this product that brings security, through greater certainty and predictability, in different circumstances.

Although they are currently much more widespread and known than they were some time ago, insurance has been around since antiquity. In Brazil, the insurance activity began in 1808, with the opening of ports to international trade, according to a history presented on the website of the Superintendence of Private Insurance (Susep) .

However, the insurance market has developed a lot since then and, today, insurance goes far beyond the maritime context . In this article, we will address the topic more broadly and also address some specific types of insurance, in addition to its functioning and relevance. Follow along to know everything!

What is insurance?

According to Susep, insurance is a type of contract that determines that one of the parties - called the insurer - undertakes, upon receipt of a payment - the premium -, to indemnify the other party - called the insured - in relation to losses provided for in the agreement.

The concept is formalized by Article 757 of the Civil Code, which establishes that:

• “ Art. 757 . Under the insurance contract, the insurer undertakes, upon payment of the premium, to guarantee the legitimate interest of the insured, concerning a person or thing, against predetermined risks.

Single paragraph.It can only be a party to the insurance contract, as an insurer, a legally authorized entity for this purpose.”

In the context of law, according to its legal nature, insurance is considered a contract:

• Bilateral: has proportional rights and duties;
• Onerous: there is the presence of the prize;
• Consensual: it is perfected according to the manifestation of the will of the parties;
• Random: the risk is a determining factor of the business, since there is the possibility of the occurrence of the accident;
• With continued execution: valid for the duration determined by the parties

In summary, we can say that they are contracts that guarantee that a company authorized to do so will indemnify the insured in the event of an undesired situation that is foreseen among the agreed coverage and has generated some type of damage.

What are worth for?

After exposing the definition of the concept, it becomes much easier to understand the relevance of insurance. This contract is a very valuable tool, both for companies and for individuals, with regard to protection against losses that may occur due, for example, to incidents.

In this way, insurances prevent or reduce losses in unforeseen situations and offer greater peace of mind for policyholders. 

In addition, these contracts can be signed to protect material goods and/or property, as in the case of automotive or residential to protect people, such as life or personal accident insurance. Also, to secure other formal agreements — which is what happens with surety bonds. 

In addition, it is worth considering that some types of insurance are mandatory by law and its contracting guarantees compliance with the legislation. This is the case, for example, of the Road Carrier Liability Insurance (RCTR C) , a category of cargo transport insurance that indemnifies policyholders for damage resulting from accidents on national roads.

How does insurance work?

Generally speaking, insurance is protection against risks that something or someone takes. In this sense, it is characterized by the fact that there are at least two parties involved and that one pays a certain amount to the other, guaranteeing that it will be compensated if a situation occurs that causes it harm or damage.

But this contract, in addition to determining the insured object, the amount to be paid and the indemnity limit, also establishes the duration of the agreement, the situations that can be indemnified and the other conditions defined between the parties.

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