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The world we live in is extremely uncertain. A risk at any step we take is unknown. All of us, our families, and our businesses are exposed to different types of risks at different levels. Although these risks cannot be predicted or controlled, insurance acts as a precaution and protection for us against the unexpected.
Therefore, the importance of insurance is non-negligible and unsurpassed. It has evolved as a tool for safeguarding the financial interest of people and their well-being.
Let’s have a deeper look at the importance of Insurance and know why is it necessary to have one:
It gives financial support to businesses and individuals against the losses or damages that might occur in the future. It acts as a shield against events that might disrupt the financial planning of an individual or organization.
Insurance generates long-term financial resources from the premiums it collects. Since these policies are payable in the future, the funds generated through premiums are invested and utilized in the economic development of the country. Roads and other infrastructures that help in nation-building are constructed out of these funds. These investments result in the growth of employment opportunities in turn helping the capital formation in the country.
Life insurance policies can be looked upon as a channel of investment and saving too. These policies ensure regular savings, that are invested in the form of a premium. A lump sum of these premiums altogether is paid to the insured on the maturity of the contract. This is a way in which one can collect a good amount of funds that can be in the future, utilized by the insured or his/her family members.
Insurance provides an aid for the losses that might occur if one starts or expands his business. This develops a sense of security in an individual and gives him a motivation for undertaking the risk. It also gives a push to invest more funds and ensure proper working of the business, overcoming any financial constraints that the business might suffer otherwise.
Health issues are a very big concern for most people today. Medical expenses and costs of treatments are rising day by day and are high enough to drain a person of his savings. Medical insurance provides coverage for various illnesses. Nevertheless, nothing can compensate for the immense mental pressure in such situations. Financial support can ease things to some extent.
The basic role of insurance is to shift the risk from the insured to the insurer. The insurer collects funds, in the form of premiums from a huge number of people. Whenever there is a requirement of funds by an insured, it is compensated from the funds collected. This helps in the distribution of risk amongst a huge population.
In a country like ours where savings and security both need to be insured, insurance has proved to be of great help. It channelizes people’s savings and offers them security. The vast development of the insurance industry and proper utilization of its funds have also created a huge number of employment opportunities. Thus, insurance has proved to a blessing and support for the economy too.