The insurance provides a safeguard against uncertainties and risk. It is important for individuals as well as for institutions due to the following reasons.
1. Insurance provides security
The Businessman should not have worry about the losses or damages at the time of loss in their property if they are duly insured. Insurance provides financial protection to business assets and properties against the risk of theft, fire accidents or any other natural calamities. Insurance keeps the person free from tension, fear and worries of various risks.
2. Insurance reduces business risk or losses
In Business, commerce and industry, huge properties are employed. The property may be turned into ashes due to the slight negligence. A person may not be sure of his life and health. 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. Insurance provides mental peace
Insurance provides mental peace to the insured. It removes tension, fear, and anxiety associated with risks and uncertainties. An individual can devote himself to achieve efficiency in economic activities due to the paceful state of mind.
4. Insurance maintains your family’s standard of living
Insurance provides financial protection against unexpected risk. Due to the financial protection of life and property, insurance avoids the unfortunate financial crisis of an individual and his family. The insured helps the individual to maintain his standard of living even in old age.
5. Generates financial resources
Insurance generates funds by collecting the premium. The funds are invested in government securities and stock. These funds are gainfully employed in the industrial development of a country for generating more funds. It can be utilized for the economic development of the country. Employment opportunities are increased by big investments that lead to capital formation.
6. Life insurance encourages savings
Insured should pay the amount of premium regularly. It develops the habit of saving. The deposited premium cannot be withdrawn like a bank deposit. Life insurance is the best medium of saving and investment. It is a good means to make provision for retirement age.
7. Promotes foreign trade:
Foreign trade is relatively riskier than domestic trade. There ae different types of risk in transit like marine perils, explosion, terrorism etc. Insurance provides protection and covers the loss of such risks and thus promotes foreign trade.
8. Medical support
A medical insurance is considered as an essential element in managing risk in health. Anyone can be a victim of critical illness unexpectedly. Rising medical expense is of great concern. Medical Insurance is one of the insurance policies that cater for differently.
9. Reduce inflation
Premium collected by the insurance company reduces the supply of money. On the other hand, the collected fund can be invested in productive purpose. Such investment helps in increasing production and decreasing the impact of inflation in the country.
10. Employment opportunities
Insurance companies need different types of personnel with distinct skills, experiences, and academic qualifications. They provide employment opportunities to the people of the country. So, hundreds of people are engaged in insurance business.