Thursday, August 13, 2009

BENEFITS OF INSURANCE

Insurance covers many risks and uncertainties in the world of business and act as a boon to the industrial or commercial concerns and general public. The following are some of the important services of insurance.
  1. Risk Transfer : Businessman can easily and conviently transfer the risk of loss of insurance. It also safeguard the interest of individual and public.
  2. Protection : Businessman do not have to worry about losses or damage when the risk of loss to their property is duly insured. They will receive compensation against actual loss their position becomes "as you were" even though the actual loss takes place. In life insurance , life policy give financial protection to the dependents to the extent of the assured who may be the only bread winner in the family.
  3. Assured Profit : An insured businessman or policy holders can enjoy normal expected profits eg. 15% or 20% margin of profit.
  4. Benefits to Consumers: As the property of the businessman is duly insured, and he can get a normal profit margin, he can charge lower prices to consumers.
  5. Insurance Serves as a Basis of Credit : Insurance has the effect of improving credit standing of businessman, commercial banks and financial institutions insist for insurance of articles which are kept as security for loans. Life policy is a valuable asset and can raise an emergency loan against it.
  6. Investment : A life insurance contract provides not only protection but also investment, or a pension in old age. Under life policy, one can also get bonuses added to the policy amount when we have with profit life policy.
  7. Insurance encourages savings : Insurance is particularly true of life insurance. The insured person must save out of his current income an amount equal to the premium to be paid regularly and punctually. Thus, life insurance is a compulsory form of saving for the rainy day. For persons of limited means there is no other alternative substitute of savings.
  8. Capital Formation : Insurance companies as institutional investors can mobilize small national savings in the form of insurance premia. They usually invest these funds in shares and debentures of business companies and also in government securities. This leads to faster capital formation.
  9. Insurance offers many benefits to society : Some of the more important services offered by insurance to society in general are :
  • It creates confidence among the investing public.
  • It ensures security and safety.
  • It provides tax relief benefits.
  • It encourages provision for the future.
  • It leads to higher savings and investments.
  • It helps as uncertainty of business losses is reduced.
  • It attracts employees of better ability and caliber.
  • It enables small businesses to complete with large ones.
  • It provides maximum economic growth of the country.
  • It creates employment opportunities.
  • It ensures larger industrial development.
  • It can be used as a measuring rod during the period of inflation and deflation.

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