Justice is the insurance which we have on our lives and property – Explain
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 the risk of loss to life and property.
Insurance contributes a lot to the general economic growth of the society by provides stability to the functioning of the process. The insurance industries develop financial institutions and reduce uncertainties by improving financial resources.
(1) Provide safety and security: Insurance provides financial support and reduce uncertainties in business and human life. It provides safety and security against a particular event. There is always a fear of sudden loss. Insurance provides a cover against any sudden loss. For example, in the case of life insurance financial assistance is provided to the family of the insured on his death. In the case of other insurance, security is provided against the loss due to fire, marine, accidents etc.
(2) Generates financial resources: Insurance generates funds by collecting premium. These funds are invested in government securities and stock. These funds are gainfully employed in the industrial development of a country for generating more funds and utilized – for the economic development of the country. Employment opportunities are increased by big investments leading to capital formation.
(3) 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 the payment of regular premium. Life insurance provides a mode of investment. It develops a habit of saving money by paying a premium. The insured get the lump sum amount at the maturity of the contract. Thus life insurance encourages savings.
(4) Promotes economic growth: Insurance generates a significant impact on the economy by mobilizing domestic savings. Insurance turn accumulated capital into productive investments. Insurance enables to mitigate loss, financial stability and promotes trade and commerce activities those results into economic growth and development. Thus, insurance plays a crucial role in the sustainable growth of an economy.
(5) Medical support: A medical insurance considered essential in managing risk in health. Anyone can be a victim of critical illness unexpectedly. And rising medical expense is of great concern. Medical Insurance is one of the insurance policies that cater for different type of health risks. The insured gets a medical support in case of medical insurance policy.
(6) Spreading of risk: Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of insurance is to spread risk among a large number of people. A large number of persons get insurance policies and pay a premium to the insurer.
(7) Source of collecting funds: Large funds are collected by the way of premium. These funds are utilized in the industrial development of a country, which accelerates economic growth. Employment opportunities are increased by such big investments. Thus, insurance has become an important source of capital formation.