IMPORTANCE OF INSURANCE
The world we live in is quite unpredictable and we have to look out for the risks that can be controlled beforehand so that we can sustain our living. People or individuals, businesses, homes and offices or properties are or can be exposed to various types and levels of risks and uncertainties. Few of these risks include losses of lives, properties or assets or health issues, etc. It is quite impossible to save yourself from every possible risk but the major ones that we can account for have the potential to be controlled by us. It is possible to save greater financial losses or loss of assets of an individual by compensating them with financial backup. insurance is that type of financial product that can bring down the cost or effect of the loss originated from the different types of risks.
Insurance that plays as a helping hand for an individual, it also helps in the economic growth of the nation by yielding stability to the functioning of business and produce long-term financial resources for industrial developments. This also encourages the virtue of savings amongst the individuals and also promotes employment for millions, especially in a country like India where savings and employment are important aspects of life.
The following describes how the insurance sector acts as an important key to the development of an economy:
1.Safeguards and provides security to Individuals and business:
Insurance provides financial support and also reduces the risk that an individual or a business can face at the step of every life-cycle.
It supplies with an ideal risk mitigation mechanism against events that can cause financial losses and distresses to an individual and businesses.
For instance, the medical costing for treatment and facility is increasing day by day, It can be problematic for a family who has a very calculated budget. But with the help of Health Insurance, one can protect themselves and their families from this great expenditure on health treatment. The business insurance provides financial support against financial loss due to fire, theft, mishaps related to marine, etc.
2. Generates Long-Term Financial Resources:
The process of generating funds in insurance sector comes from the premiums of policyholders. The long-term duration of keeping these funds, these are invested infrastructure assets like roads, bridges, power plants, dams, etc which is a significant procedure for nation-building.
These also lead to employment opportunities because of the need for infrastructural growth and big investments that guides capital formation in the economy.
3. Promotes Economic Growth:
This sector has a huge influence on the overall economy by utilizing and mobilizing domestic savings. Insurance turns into assembled capital and that becomes high-yielding investments for the economy. Insurance entitles for reduction of losses, financial balance and encourages trade and commerce activities that promotes economic growth and development.
4. Provides support to the family during emergencies:
There might be a situation where one doesn't have enough money in hands to treat their loved ones in a time of emergencies. This is where insurance comes in and can act as a helper during these adverse scenarios. It makes one well-prepared and can handle the situation where one doesn't panic and save their families from any further loss.
5. Spreads risk:
The insurance can lead to the facilitation of moving of risk of loss. The basic crux of insurance is to spread risk among a large group of people. Then large masses of people pay for the premiums for their insurance and then if there ever occurs a loss, it is compensated using these incomes of funds.
