Wednesday, August 12, 2009


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Human beings, his family and properties are always exposed to different kinds of risks. Risk involve the losses. Insurance is a tool which reduces the cost of loss or effect of loss caused by variety of risk. It accumulates funds to meet individual losses. It is not device to prevent unwanted event of happening or cause of loss but protects them against that loss by compensating which as lost. The role and importance of insurance are discussed as follows:

1. Insurance provides security

Insurance provides safety and security against the loss on a particular event. Life insurance provides security against death and old age sufferings. Fire insurance protects against loss due to fire while Marine insurance provides protection and safety against loss of ship and cargo. For personal accident and sickness insurance financial protection is given when the individual is unable to earn. In other insurance too, this security is provided against the loss at a given contingency.

2. Insurance reduces business risk or losses

In Business, commerce and industry, huge properties are employed. Because of slight negligence, the property may be turned in to ashes. A person may not be sure of his life, health and cannot continue the business up to the longer period to support his dependents. By the help of insurance, he can be sure of his earning, because the insurance company will pay a fixed amount at the time of death, damage by fire, theft, accident and other perils.

3. Insurance provides peace of mind

Insurance removes the tensions, fears, anxiety, frustrate or weaken of the human mind associated with the future uncertainty. By providing financial position and promise to compensate losses arise out from various risk, it provides peace of mind and stimulates more and better work performance of an individual.

4. Life insurance encourages saving

The insured has an obligation to pay premium regularly and cannot be withdrawn easily before the expiry of the term of policy. Life insurance encourages the habit of regular and systematic saving through premium and after a certain period, it would be a part of necessary saving of the insured person.

5. Insurance accelerates the economic growth of the country

To develop the economic growth of the country, insurance provides strong hand and mind, with protection against loss of property and capital to produce more wealth. It provides protection against different kinds of loss caused by risk. It accumulates the capital from the insured and utilizes for the development of country. Thus, the insurance meets all the requirements for the economic growth of a country.

6. Insurance provides credit facilities

The insured person can get loan by pledging insurance policy and the interest will not exceed the cash value of policy charged by insurer. In case of death of insured person, the policy can be utilized for setting of the loan with interest. Business person can take loan on the basis of insurance documents from the bank also.

7. Insurance helps to reduce inflation

Inflation created from over supply of money and on less production entities. Insurance can help to reduce the inflationary pressure in two ways. Firstly, it collects money as an amount of premium which controls over supply of money and secondly, it provides sufficient funds for increase production entities. Thus, it reduces the impact of inflation.

8. Insurance makes security and welfare of employees

The security and welfare of employees is the responsibility of employer. These security and welfare are easily met by life insurance, accident and sickness benefit and pension which are generally provided by group insurance. The premium for group insurance is normally paid by the employer. Insurance is the simple method for employer to fulfill their responsibility. Due to these benefits, employee will devote their maximum capacities to complete their job.

9. Other Importances of Insurance

a) Insurance helps to promote foreign trade providing protection again trade risk.

b) Insurance increases business efficiency eliminating the loss of damage, destruction, or disappearance of property of goods.

c) Insurance protects the social wealth providing protection against social evil.

d) Development of insurance business helps to solve the evil of unemployment, generating employment opportunity in the country.

e) The insured gets tax benefit in life insurance.


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  2. Insurance is the most important part for every human beings. It can provide you safety and security against your lose. If you have a insurance and when you will face a losse, insurance can reduce your loses.

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