Importance of insurance
Man’s life has to face calamites in different forms. Untimely death, loss of property by fire, loss in accidence, etc. are example of uncertainties and risks to which man’s life is exposed. Insurance is such a measure in society that provides protection against such calamites. As such, the following advantages obtained from insurance clearly show its importance:
(1). financial security: insurance provides financial security to an insured. It guarantees protection against large and uncertain losses in return of small premium. Different types of insurance are there to give different kids of protection. Insurance provides certainty of payment in case of loss. Thus, insurance gives a feeling of security against the possible occurrence of uncertain events.
(2). Risk reduced : men are exposed to various kinds of risk and uncertainty. It is impossible to eliminate risk and uncertainty completely. Insurance is a cooperative effort of sharing risk. Thus, the impact of risk can be reduced through the distribution of risk.
(3). Mental peace: insurance provides mental peace to the insured. It removes the tensions, fears and anxiety associated with the future uncertainty that center round the morden life can be eliminated.
(4). Encourages saving: the insured has to pay a premium regularly. Thus, it encourage the habit of saving specially in life insurance. It is a good means to make provisions for old age .
(5). National development: insurance companies take premium in consideration to compensative loss. They keep a part in a fund for this purpose and rest of the money is invested in different industries and government bonds for the development of the country.
(6). Basis of credit: insured can get loan by pledging insurance policy as a security. Moreover financial institutions grant credit facilities on the pledge of property only if they are insured.
(7). Checks inflation : premium collected by insurance company reduces money supply and this checks inflation. Moreover the premium collected is invested in productive purpose and this increase production. This also reduces the impact of inflation.
(8). Promotes foreign trade : foreign trade is more risky. Chances of fire and marine perils are more in this field. Insurance takes away these risks and promotes foreign trade. Thus, it helps to earn foreign exchange.
(9). Employment opportunity: hundreds of people are engaged in insurance business. Thus, insurance provides employment opportunity in the country.
Man’s life has to face calamites in different forms. Untimely death, loss of property by fire, loss in accidence, etc. are example of uncertainties and risks to which man’s life is exposed. Insurance is such a measure in society that provides protection against such calamites. As such, the following advantages obtained from insurance clearly show its importance:
(1). financial security: insurance provides financial security to an insured. It guarantees protection against large and uncertain losses in return of small premium. Different types of insurance are there to give different kids of protection. Insurance provides certainty of payment in case of loss. Thus, insurance gives a feeling of security against the possible occurrence of uncertain events.
(2). Risk reduced : men are exposed to various kinds of risk and uncertainty. It is impossible to eliminate risk and uncertainty completely. Insurance is a cooperative effort of sharing risk. Thus, the impact of risk can be reduced through the distribution of risk.
(3). Mental peace: insurance provides mental peace to the insured. It removes the tensions, fears and anxiety associated with the future uncertainty that center round the morden life can be eliminated.
(4). Encourages saving: the insured has to pay a premium regularly. Thus, it encourage the habit of saving specially in life insurance. It is a good means to make provisions for old age .
(5). National development: insurance companies take premium in consideration to compensative loss. They keep a part in a fund for this purpose and rest of the money is invested in different industries and government bonds for the development of the country.
(6). Basis of credit: insured can get loan by pledging insurance policy as a security. Moreover financial institutions grant credit facilities on the pledge of property only if they are insured.
(7). Checks inflation : premium collected by insurance company reduces money supply and this checks inflation. Moreover the premium collected is invested in productive purpose and this increase production. This also reduces the impact of inflation.
(8). Promotes foreign trade : foreign trade is more risky. Chances of fire and marine perils are more in this field. Insurance takes away these risks and promotes foreign trade. Thus, it helps to earn foreign exchange.
(9). Employment opportunity: hundreds of people are engaged in insurance business. Thus, insurance provides employment opportunity in the country.
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