1. Health
  2. Insurance

7 Importance of Insurance

Insurance has evolved as a process of safeguarding the interest of people from loss and uncertainty. It may be described as a social device to reduce or eliminate risk of loss to life and property.

 Insurance Protects the Small Guys

When you look at your industry, you see the “big guys” and the “small guys.” If a risk goes wrong, the big guys will be able to survive. They can take a hit. But the little guys can’t take a hit. As a result, they are more risk averse, and in some cases, they sell out to the big guys. If enough little guys leave the industry (and one big guy swallows them up), you’re left with a monopoly. With insurance, however, the little guys have support if they want to take a risk, which means they stick around longer. 

Business Continuation

!n any business particularly partnership business may discontinue at the death of any partner although the surviving partners can restart the business, in both the cases the business and die partners will suffer economically.

The insurance policies provide adequate funds at the time of death. Each partner may be insured for the amount of his interest in the partnership and his dependents may get that amount at the death of the partner.


Insurance Grants Peace of Mind

Insurance, an intangible, provides another intangible: peace of mind. Business owners can take on certain business ventures because they can shift the risk — thanks to insurance. This reason is the counterpart to No. 2 — lenders require insurance. Insurance is the required (by lenders) safety net that lets entrepreneurs explore opportunity.

 Life insurance encourages savings

Insurance does not only protect against risks and uncertainties, but also provides an investment channel too. Life insurance enables systematic savings due to payment of regular premium. Life insurance provides a mode of investment. It develops a habit of saving money by paying premium. The insured get the lump sum amount at the maturity of the contract. Thus life insurance encourages savings.

Lenders Require Insurance

This reason is tied to No. 1. Lenders require that you have insurance. Think about it: Mortgage lenders want proof of insurance before you buy or build a new building. In short, to get the money your business needs to keep going, it’s likely you enjoy the benefits of insurance. Without insurance, your winning business model can’t get the funding it needs to take its first step, or your established business model can’t get the funding to evolve and better compete.

Insurance Ensures Family and Business Stability

Insurance is a safety net for when risks go wrong. Life insurance can support the life of a family, should a member be lost. It’s similar for a business.this reason why insurance is important dovetails nicely with peace of mind .

Business Efficiency is Increased with Insurance

When the owner of a business is free from the botheration of losses, he will certainly devote much time to the business. The carefree owner can work better for the maximization of the profit.

The new, as well as old businessmen, are guaranteed payment of a certain amount with the insurance policies at the death of the person; at the damage, destruction or disappearance of the property or goods.