Insurance provides benefits to an individual, family, businessman as well as a society. the main advantages of insurance can be described as follows: -
- Provides economic protections
Insurance provides economic protection to the insured. It provides financial protection to the insured against the unexpected losses in consideration of nominal amount called premium. It provides financial protection to the dependent in case of pre-matured death of insured. The insurance company also covers the loss of properties due to theft, fire, accident and other natural calamities.
- Shares risks
People are exposed to various kinds of risks and uncertainties. It is impossible to eliminate risks and uncertainties altogether. Insurance is a co-operative device, which helps to share the risks among the insured. Thus, the impact of risk can be reduced to the minimum through the distribution of risks among many insured members.
- Maintains standard of living
Insurance has become sure instrument to provide financial protection against an unexpected risk of losses. By this means, people can maintain their living standard too. It is because insurance company provide a safeguard in terms of money to avoid the unfortunate financial crisis.
- Encourages saving
An insured person should compulsorily pay the amount of premium in time as stated in the agreement in order to avoid fine and lapse of an insurance policy. It encourages for developing a saving habit of persons. It helps to reduce unnecessary expenses. Hence, insurance is a means of encouraging saving.
- Eliminates dependency
In the event of the death of breadwinner or destruction of properties, the family suffers from unbearable and non-compensationable losses. The insurance protects against the uncertainties providing adequate financial support. The life insurance policy gives full financial support to the insured in his old age. It also provides financial support to the dependent in case the death of the insured. This provision definitely helps to eliminate the dependency of people.
- Creates employment opportunities
Insurance companies need different types of personnel having distinct skills, experiences and academic qualifications for operating its business. So, people get an ample employment opportunity in insurance companies. They also increase employment opportunities indirectly by promoting trade and industry in the country.
- Promotes foreign trade
Foreign trade is relatively riskier than domestic trade. Goods and properties are transported from distant places by means of air or water or land transport or combination of these modes. There are different types of risks in transit associated with a foreign trade like marine perils, chances of an explosion, terrorism, storm, tempest etc. Insurance provides protection against such unpredictable risks of losses, which definitely promotes foreign trade.
- Helps to operate business smoothly
Insurance provides financial compensation in case of loss or damage to the properties of the business. An insurance policy taken for the employees increases their morale and motivation at work. Therefore, insurance plays a vital role to let the business run smoothly even in the situation of unfavorable events.
- Help to reduce inflation
The term inflation indicates the increase in the price level of goods or services. Inflation is a concept, which every citizen is not only aware of it, but they experienced painfully. In order to control the inflation, a volume of money in the market should be reduced. An insurance company takes the money from the people in the form of premium, which reduces the volume of money in the market. Hence, it helps to control the inflation in the country.
- Help to develop economy
Insurance companies collect premium against life and non-life policies. The amount of premium so collected is invested in productive sectors like trade and industry. Such investment helps to promote trade and industry in the country. Ultimately, it helps for the economic development of the country.