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Insurance is an important aid
The life insurance
Insurance provides the following services to the insured person
Insurance is an important aid to commerce and industry and the common man
As it is for an individual or even a large business house to invest millions of rupees in the huge factory, building and equipment etc. Without greeting some protection against the risk of fire, theft etc. The insurance minimises the severity of the effects of various kinds of risks.
The insurance family
The industry insurance
The Insurance provides the following services to the insured person.
Protection- Insurance provides protection against the risk of loss. By providing protection insurance gives a sense of security to the insured person. With the sense of security the insured can perform the business with more peace of mind and confidence.
Distribution of risk- When the insured suffers a loss the insurer pays him the compensation for the loss. Such loss is not actually paid by the insurer himself. He only distributes the loss suffered by an insured person among other persons who are exposed to a similar wrist and have insured against such risk. So actually insurance is an arrangement of pooling of risk. All the people pay premium amount to insurance company and out of that premium fund the insured who suffered loss is compensated.
Competitiveness - Insurance provides peace of mind to the insured. As a result insured can fully concentrate on the core issue of his business and can face the competition more strongly.
Specialisation - Insurance enables the businessman to concentrate on his activities and get specialisation in them without wasting his energy and talent by worrying about the losses or risks. The insured person feels more safe and secured which improves his efficiency and brings specialisation.
Better utilisation of capital – In the absence of insurance facility, the businessmen will have to maintain large reserves to meet the contingencies. Insurance avoids the need to keep the huge fund as reserves because the insurer gives compensation at the time of loss. The reserves can be utilised in more productive activities which means better utilisation of capital.
Promotes foreign trade - there are heavy risks involved in sending the goods through airline or ships to other countries. The marine and Airways Insurance provides protection from such risk, so the businessmen can involve themselves in import and export without worrying about the risk of loss of goods.
Credit facility – The insurance policy is accepted as a security by the banks or financial institutions for giving loan or advances. The creditworthiness of the businessman increases after insuring his goods and services.
Capital formation - By collecting premium from insures the insurance companies collect huge amounts of funds. The insurance companies invest these funds in industries and corporate sector, thus resulting in formation of capital.
Social welfare - The general insurance provides social security to the common man as many policies offer pension at old age, children's education funds and amount of marriage expenditure.