Benefits of insurance to individuals, organizations and society

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Insurance benefits individuals, organizations and society in more ways than the average person. Some benefits of insurance are obvious while others are not.

  1. The obvious and most important benefit of insurance is the payment of damages. An insurance policy is a contract used to indemnify individuals and organizations for covered losses.
  2. Another benefit of insurance is the management of cash flow uncertainty. Insurance cover provides payment in the event of loss. Therefore, the uncertainty of paying the loss out of pocket is significantly reduced.
  3. The third and more unusual benefit of insurance is compliance with legal requirements. Insurance provides evidence of financial resources to meet statutory and contractual requirements.
  4. Another very important benefit of insurance is the promotion of risk control activity. Insurance policies provide incentives for implementing loss control programs due to policy requirements and premium saving incentives.
  5. The fifth advantage of insurance is the efficient use of the resources of the insured. Insurance risk makes it unnecessary to set aside a large sum of money to pay for the financial consequences of the risk that can be insured. This allows that money to be used more efficiently.
  6. Another unusual, important benefit of insurance is support for the insured’s credit. Insurance facilitates loans to individuals and organizations by guaranteeing that the lender will be paid if the collateral for the loan is destroyed or damaged by an insured event. This reduces the uncertainty of the lender defaulting on the money the party has borrowed.
  7. The seventh advantage of insurance is that it provides a source of investment funds. Insurance companies collect premiums in advance, invest those premiums in a variety of investment vehicles, and pay claims if they do.
  8. The ultimate benefit of insurance is to reduce the social burden. Insurance helps in reducing the burden of non-refundable accident victims and the uncertainty of the society.

Understanding these benefits is important when analyzing the need for insurance and helps insureds justify the purchase of insurance.