The insurance has become an integral part of business and human life. ‘The fear of loss’ has been a constraint on the growth of business and trade. An uncertain future of business and of individual has always been haunting him. Insurance has been helpful in solving many problems of business and private life.
The following are the advantages of insurance:
1. Providing Security:
There is always a fear of sudden loss. There may be a fire in the factory, storm in the sea or loss of a life. In all these cases it becomes difficult to bear the loss. Insurance provides a cover against any sudden loss. In case of marine and fire insurance the loss suffered by the insured is fully compensated and he is restored to his earlier position.
In the same way, if a bread-bringing member of the family dies prematurely, the family is provided with money to continue with its livelihood. So, insurance gives security to both individual and business-man. These days insurance covers various social welfare schemes also. There are schemes providing for unemployment, sickness, accident, health and old age insurances. These schemes are helpful for poor people and help in establishing social justice.
2. Spreading of Risk:
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 premium to the insurer. Whenever a loss occurs, it is compensated out of funds of the insurer. The loss is spread among a large number of policy-holders.
Insurance covers the loss of an individual but the social loss cannot be eliminated. If the property of a person is lost by fire, he will be compensated by the insurance company. The loss of goods will remain as a social loss. Insurance cannot eliminate loss but it can reduce the risk to the individual.