During our lifetime, we’re exposed to several unexpected circumstances. These situations have a direct influence on our family and finances. All of this eventually piles up and becomes a prominent source of stress if not taken care of. Insurance comes to the rescue in such cases, the various functions of insurance revolve around taking care of the possible losses that might occur to an individual or business.
Buying insurance helps to attain security against emergencies and accidents. You have to pay small periodic amounts of money as a premium against coverage of a huge expected or unexpected loss. These insurance premiums are also considered as the policyholder’s share in compensating the losses, although the most part is taken care of by the insurance company.
Functions of insurance are further classified into two categories-
1. Primary functions
2. Secondary functions
Better planning and administration can reduce the uncertainty of the loss you may suffer. But we can always be prepared for all the risks which we may encounter. There is always an uncertainty of when it will occur, how much loss will be incurred? This is where insurance provides you with the certainty of payment in case of a loss. The insurance company charges you a periodic premium in exchange for providing this certainty.
Insurance protects you from the probable chances of loss. Nobody knows when or how much of a loss may occur. On the occurrence of it, there is a high possibility for an individual to fall into debt. The insurance guarantees payment in case of a loss. It protects you and your family from all the sufferings which may be caused. The insurance cannot prevent the risk but can provide financial aid when a mishap happens.
The loss arising from the risk is uncertain. Investing in insurance minimizes the financial pressure as all the insured individuals share the risk by paying the premium that acts a compensation for the insured individual who suffers a loss.
Here are some secondary functions of insurance listed below-
The insurance company joins hands with other institutions which are engaged in preventing the losses of society. Reduction in loss will lead to lesser payments in premium. This means you can save more while purchasing a policy. Lesser premium invites more and more opportunities. So, the decreased premium ensures that people from various strata of society can avail of insurance easily. The insurance provides financial assistance to organizations like
Insurance provides capital essential for the growth of society. The funds collected from the policyholders are invested in a productive channel. With the help of investment in insurance, debts are minimized to a great extent. Industries, businesses, and individuals are benefited from the investment and loans of the insurers.
Investing in insurance eliminates worries of losses incurred on the occurrence of death and destruction of property. This can make a person and his family worry less about the future. Such people can also devote their time and effort for better achievement for themselves and society. It enhances the efficiency within a person and also the society.
The insurance protects people from huge losses of damage, destruction, and death. It gives them the initiative to work hard for the betterment of society.
Insurance as a tool not just offers financial stability but contributes greatly towards the well-being of individuals. Considering the salient features mentioned above and the myriad of benefits insurance offers, it is the perfect arsenal you can choose to safeguard yourself from the uncertain risks of the future. So it would be wise to avail one today!
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