The insurance has been an integral part of human life and to the business. The fear of a loss’ has been the constraint on business and trade growth. The uncertain future of individual and business has been haunting everyone always. Insurance has played the central role as helping solve different problems of private life and business. Here are some of the advantages of insurance:
1. Offering Security:
There has been fear always of the sudden loss. There can be a fire in a factory, storm in a sea, or damage of life. In these entire cases, it becomes challenging to withstand the loss. Insurance offers the cover against any unexpected loss. In the event of a fire and marine insurance, the damage being suffered by the insured is compensated, and the owner is restored as he was in the earlier position. Similarly, if the bread-bringing person of a family dies too early, the family will be offered with money to assist them in continuing with the livelihood. Therefore, insurance provides security for the business-man and the individual.
2. Spreading of Risk:
The elementary principle of insurance is actually to spread the risk among a big number of people. The significant number of people get insurance policies and then pay the premium to an insurer. Whenever the loss happens, it’s compensated out of the funds of an insurer. The loss will then be spread among the significant number of the policy-holders. The insurance covers a loss of the individual, but a social loss can’t be removed. If the fire has lost property of the person, he can be compensated by an insurance company. A loss of the goods can remain as a social loss. The insurance can’t eliminate the loss, but it will reduce risk to an individual.
3. Encourage the Savings:
Insurance protects the risks and also provides the investment channel. Life insurance offers a mode of investment. Insurance develops the habit of saving money when you pay the premium. Amount of the policy being paid to an insured or the nominees work as a saving. In case of the fixed time policies, insured gets the lump-sum amount once maturity of a policy.
4. Source of Collecting Funds:
In the law of the insurance cover, an insured pays the premium to an insurer. The premiums are received frequently in installments. The significant funds are being collected in terms of premium. These funds will be gainfully be employed in the industrial development of the country. The persons are purchasing the life insurance policies from every walk of life. Likewise, it assists in collecting the savings from a significant number of persons.
5. Encourage International Trade:
International trade involves various risks when transporting the products from the country to the other. In the absence of the insurance, traders can always be many worried fora safe the arrival of the goods. Quantum of the trade can be limited due to uncertainties and the risk involved during the transit. The insurance offer protection against every type of the sea-risks. It also help develop the international trade on the large scale.