You cannot say that insurance is not important by buying only cheap things like furniture and grocery items. It will necessary for you when you buy something with your lifetime earnings. You will need some guarantee to secure your income. When you buy insurance then you get a promise. It’s a promise that if something disastrous happens to your business, your insurance will help you to make your business whole again. Let’s talk about the benefits of Insurance.
Major Benefits of Insurance
1. It Provides Security:
We are always afraid of sudden loss. It may natural disasters of artificial like, fire in the factory, a storm in the sea, or loss of life. In all these cases it becomes problematic to accept the loss. Insurance offers a cover against any unexpected loss. If any circumstance arises like marine and fire insurance, the loss experienced by the insured is fully compensated and he is reestablished to his initial position. It may be a loss of human life like, a member of the family dies prematurely, the family is offered money to continue with its living. This shows that insurance gives security to both normal men and businessmen.
2. It works by Spreading Risk
The major principle of insurance is to spread risk among a huge number of people. A massive number of individuals get insurance policies and pay a premium to the insurer. Whenever a loss occurs, it is remunerated out of the funds of the insurer. This loss is covered by the premium of a large number of people. The insurance always covers the loss of an individual but the social loss cannot be eradicated. If the property of a person is lost by fire, or any other accident then the loss will be compensated by the insurance company. But the compensation cannot fulfill the social loss due to the accident.
3. Insurance is a source for Collecting Funds
Insurance companies are successful to cover risks because they collect a large fund through premium. A large fund doesn’t mean form a single individual but it is a collective fund by overall payers. The premium is received recurrently in installments. Large funds are placid by way of premium. These funds can be profitably invested in the industrial development of a country. Life insurance policies are acquired by persons from all walks of life. It benefits in collecting funds from a large number of persons.
4. It Encourages Savings:
The main motto of insurance is promoting saving habits. If an individual pays premium regularly then it can be seen like he is saving money for any unwanted loss. Insurance does not only guard risks but it provides an investing system too. Do you know life insurance provides a mode of investment? The insurance develops a habit of saving money by giving a premium.
5. It promotes international Trade:
International trade is full of risks and difficulties. Long-distance trade must have insurance because anything can happen while transportation. If the trade is using waterway then it can be lost by accidents in the water. Similarly, airways and roadways are also full of risks of accidents. International trade involves many risks in transporting exports from one country to another. In the lack of insurance, the traders will always be anxious about the safe arrival of freights. Insurance guards beside all types of sea-risks. It has helped the expansion of global trade on a huge amount.