IMPORTANCE OF INSURANCE

Insurance may be delineated as a social device to cut back or eliminate risk of loss to life and property.

Insurance contributes a lot to the overall economic {process} of the society by provides stability to the functioning of process. The insurance industries develop monetary establishments and cut back uncertainties by up financial resources.

1. Provide safety and security:

Insurance provide monetary support and cut back uncertainties in business and human life. It provides safety and security against particular event. There is always a concern of sudden loss. Insurance provides a cover against any sudden loss. For example, in case of insurance financial help is provided to the family of the insured for death. In case of other insurance security is provided against the loss attributable to fireplace, marine, accidents etc.

2. Generates financial resources:

Insurance generate funds by collecting premium. These funds are invested with in government securities and stock. These funds are gainfully used in industrial development of a country for generating a lot of funds and utilized for the economic development of the country. Employment opportunities are hyperbolic by huge investments leading to capital formation.

3. Life insurance encourages savings:

Insurance does not solely defend against risks and uncertainties, but additionally provides AN investment channel too. Life insurance enables systematic savings attributable to payment of normal premium. Life insurance provides a mode of investment. habit of saving increses. The insured get the lump sum quantity at the maturity of the contract.

  

4. Medical support:

A medical insurance considered essential in managing risk in health. Anyone can be a victim of crucial malady unexpectedly. And rising medical expense is of great concern. Medical Insurance is the insurance policies that cater for various variety of health risks. The insured gets a medical support in case of medical policy.

5. Spreading of risk:

Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of insurance is to spread risk among an outsized variety of individuals. A large variety of persons get insurance policies and pay premium to the nondepository financial institution. Whenever a loss occurs, it is compensated out of funds of the nondepository financial institution.

6. Source of aggregation funds:

Large funds area unit collected by the means of premium. These funds are utilized in the industrial development of a rustic, which accelerates the economic growth. Employment opportunities are hyperbolic by such huge investments. Thus, insurance has become an necessary supply of capital formation.