what is merits of insurance
Answers
Reasonable profit
The businessmen can earn a reasonable profit for their businesses. The insurance can help them to earn the same rate of profit if their business fails to generate income.
Sense of security
There are many chances of losses in a business. But due to insurance, the risk of losses is transferred to insurance company and it gives the sense of security to businessman.
Employment increase
The insurance companies provided the jobs to thousands of people. In this way the problem of unemployment is reduced.
Protection of property
Due to insurance the personal and business property is protected from natural losses such as accident, fire, etc.
Solve the social problem
Insurance is useful device for solving the social problems. In cash of death provides finance to his family compensation is available to overcome the industrial injuries and road accident.
Favourable balance of payment
The insurance of business is an invisible export and it provides sufficient contribution toward the balance of payment
Equitable premium
The large policy holders provide large funds and small policy holders pay less money in common funds. In the way the amount of premium becomes equitable.
Research facilities
The insurance companies can conduct research about the rate of accidents, death and losses faced by business units.
Low price
The risk of loss is covered by the insurance policy. In the way insurance companies help the business to sell their products as low prices.
Spread of risk
A large number of persons get marine, fire, life insurance policies and pay premiums to the insurance companies whenever a loss occurs, it is compensated out of the funds of the insurers. The loss is spread among a large number of policy holders.
Promotes economic growth
Insurance contributes to the efficiency of the business and promotes economic growth and development.
Gives sense of security
At every moment there is a chance of loss in business. Due to insurance risk is a transferred to the insurance company and gives the sense of security to businessman.
Promotes business competition
Insurance also protects the small industrial units and also provides credit facility. So competition with the big firms increase which is very useful the customer.
Promotes international trade
Insurance companies are playing very effective role in promoting the growth of international trade. Today one exporter can send his goods to other country without a fear of damage or loss. Because he shifts his risk to insurance company by paying the premium, If ship damage, insurance company will compensate the loss.
Provides economic protections Economic Protection
Insurance provides economic and finanicial protection to the insured against the unexpected losses in consideration of nominal amount called premium. It provides financial protection to the nominee in case of the pre-matured death of insured. It 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 which may cause large losses. It is impossible to eliminate risks and uncertainties altogether but it can be reduced or shared. Insurance is a co-operative device, which helps to share the risks among the insured. Thus, the insurance company redeuces the risk of the insured in exchange for small premium.
Maintains standard of living
Insurance provides financial protection against an unexpected risk of losses due to which people can maintain their living standard. The insurance company provides a safeguard in terms of money to avoid the unfortunate financial crisis.
Encourages saving Saving
An insured person pays the amount of premium in time as stated in the agreement which encourages for developing a saving habit of persons. Hence, insurance is a means of encouraging regular saving as it helps to reduce unnecessary expenses.
Eliminates dependency
Due to death or destruction of properties, the family suffers from unbearable and non-compensational table losses. The insurance protects against those unbearable losses. The life insurance policy gives full financial support to the dependent in case the death of the insured which helps to eliminate the dependency of people.
Grants loan Loan
An insured can get the facility of a loan from an insurance company or can take loan from other financial institutions through the security of insurance policy. Thus, this provision of loan helps a person can also meet the need of fund. Bank and financial institutions prefer the insured assets as collateral for providing a loan.
Creates employment opportunities
As insurance has become business in the modern day business world, hundreds of entrepreneurs and thousands of employees have been engaging in this line. Hence, by establishing and developing insurance companies, it has provided employment opportunities to thousands of people as per their qualification and calibre.
Promotes foreign trade
The growth of the international trade of the country has been greatly helped by shifting of risk to insurance company. A ship sailing in the sea faces some miss-fortune. A fire breaks out and burns to ashes all the merchandise of a business man. But insurance is one of the devices by which these risks may be reduced or eliminated. So industrialists and exporter may devote their full attention toward the promotion of business which may increase the export activities
Helps to operate business smoothly
A business gets financial compensation in case of loss or damage to the properties of the business through insurance. An insurance policy taken for the employees increases their 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
inflation ReductionThe inflation means increase in price of goods or service. Inflation gives painful experienced to the citizen so it should be control. To control inflation, the volume of money need to be reduce. 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 through life or non life policies which are invested in various development areas 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.