Advantages of Insurance
Insurance provides benefits to an individual, family, businessman as well as a society. The main advantages of insurance can be described as follows: -
1. Provides economic protections
Economic Protection
Economic Protection
Insurance provides economic and finanicial protection to the insured against the unexpected losses in consideration of nominal amount calle premium. It provides financial protecti to the nominee in case of the pre-matured death of insured. It also cover the loss of properties due to theft, fire, accident and other natural calamities.
2. Shares risks
People are exposed to various kinds of risks and uncertainties which may cau large losses. It is impossible to elimin risks and uncertainties altogether but i can be reduced or shared. Insurance i co-operative device, which helps to share the risks among the insured. Th the insurance company redeuces the risk of the insured in exchange for sm premium.
3. Maintains standard of living
Insurance provides financial protectio against an unexpected risk of losses d to which people can maintain their livi standard. The insurance company provides a safeguard in terms of mone to avoid the unfortunate financial crisi
4. Encourages saving
Saving
Saving
An insured person pays the amount of premium in time as stated in the agreement which encourages for developing a saving habit of persons. Hence, insurance is a means of encouraging regular saving as it helps reduce unnecessary expenses.
5. Eliminates dependency
Due to death or destruction of properties, the family suffers from unbearable and non-compensational table losses. The insurance protects against those unbearable losses. The life insurance policy gives full financial support to the dependent in case the death of the insured which helps to eliminate the dependency of people.
6. Grants loan
Loan
Loan
An insured can get the facility of a loa from an insurance company or can tak loan from other financial institutions through the security of insurance polic Thus, this provision of loan helps a person can also meet the need of fund Bank and financial institutions prefer t insured assets as collateral for providi a loan.
7. Creates employment opportunities
As insurance has become business in the modern day business world, hundreds of entrepreneurs and thousands of employees have been engaging in this line. Hence, by establishing and developing insurance companies, it has provided employme opportunities to thousands of people a per their qualification and calibre.
8. Promotes foreign trade
The growth of the international trade o the country has been greatly helped by shifting of risk to insurance company. ship sailing in the sea faces some misfortune. A fire breaks out and burns to ashes all the merchandise of a busine man. But insurance is one of the devic by which these risks may be reduced eliminated. So industrialists and expor may devote their full attention toward the promotion of business which may increase the export activities
9. Helps to operate business smoothly
A business gets financial compensatio in case of loss or damage to the properties of the business through insurance. An insurance policy taken f the employees increases their motivati at work. Therefore, insurance plays a vital role to let the business run smoothly even in the situation of unfavorable events.
10. Help to reduce inflation
Inflation Reduction
Inflation Reduction
The inflation means increase in price o goods or service. Inflation gives painfu experienced to the citizen so it should be control. To control inflation, the volume of money need to be reduce. A insurance company takes the money from the people in the form of premiu which reduces the volume of money in the market. Hence, it helps to control t inflation in the country.
11. Help to develop economy
Insurance companies collect premium through life or non life policies which invested in various development areas like trade and industry. Such investme helps to promote trade and industry in the country. Ultimately, it helps for the economic development of the country.
Disadvantages of Insurance
The following are the main disadvantages of insurance: -
1. It does not compensate all types of losses which caused baisness to insured by insurance company.
2. It takes more time to provide financial compensation because lengthy legal formalities.
3. Although insurance encourages saving it does not provide the facilities that ar provided by bank.
4. It intentionally tries to compensate as less as possible to the sufferer with th aim of maximizing profit rather than maximizing well-being of the insured.
5. It may lead to the crimes in the societ as the beneficiaries of the policy may tempted to commit crimes to receive t insured amount.
6. Sometimes, the total amount of premi might be higher than the policy amoun receivable on maturity.
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