Function of insurance

                           FUNCTION OF INSURANCE

                                        1. Insurance provides certainty

Insurance provides certainty of payment at the uncertainty of loss. The uncertainty of loss can be reduced by better planning and administration.

But, the insurance relieves the person from such a difficult task.

Moreover, if the subject matters are not adequate, the self-provision may prove costlier. There are different types of uncertainty in a risk.

The risk will occur or not, when will occur, how much loss will be there?

In other words, there is the uncertainty of happening of time and amount of loss. Insurance removes all these uncertainties and the assured is given certainty of payment of loss.

The insurer charges the premium for providing the said certainty.

                              2. Ensure insured’s safety and security   

One of the primary reasons for enrolling into an insurance contract is to obtain financial protection in the case of a loss due to an unexpected disaster.

 Insurance provides assistance to policyholders and aids in lowering the uncertainties in a company or people’s lives.

 The insured party is protected against future dangers, vulnerabilities, and accidents with the aid of a policy.

 Although no insurer in the world can prevent a potentially hazardous event from occurring, they can certainly assist by providing some form of financial protection to compensate the insured party. 

                                       3. Safeguards loved ones 

 Medical insurance can assist you and your family in receiving appropriate care and covering medical costs.

 It aids in the care of their health in the event of an accident, sickness, or other unforeseen incidents.

 The well-being of your family comes first, and insurance may help you take care of it in the best way possible. 

                                                  4. Risk-Sharing 

The risk is unpredictable, and hence the loss resulting from it is also uncertain. When risk takes place, the loss is shared by all the individuals who are exposed to the risk.

 In ancient times, risk-sharing occurred only when there was damage or death; however, nowadays, depending on the possibility of risk, (the share is received from each insured in the form of premium, without the paying premium by the insured protection is not guaranteed by the insurer. 

                                             5. Prevention of losses

 It allows firms to have a backup plan in case things don’t go as planned. Insurance is a critical tool for businesses because it helps them to cover their bases while operating in a high-risk environment where losses can be catastrophic if they do not play their cards correctly.

 It also enables them to cover these enormous risks in their enterprises by paying a very small amount of premium. 

                                  6. Growth of large corporations

Any huge organisation is more vulnerable to danger. If the possibilities of loss are substantially larger, it may prevent management in those organisations from taking calculated risks that have the potential to bring in more revenues. 

Insurance helps to limit risk in some ways and encourages organisations to make risky decisions.

Insurance relieves some of the financial stress and helps firms to flourish in the long run. 

                                             7.  Boost the economy

 When firms have enough insurance coverage, they may expand their scope of economic activity, resulting in proportional rewards. In the long run, this might offer a boost to a country’s total economy.