Benefits of Insurance Flashcards
What are the benefits of Insurance?
- Financial Protection
- Compelled Savings
- Capital for Investment
- Loss Control
- Cost Stabilization
- Peace of Mind
- Creation of Employment
Explain what is Peace of Mind
The knowledge that insurance exists to meet the financial consequences of certain risks like cars, houses, and other possessions.
In addition, there is some insurance that is required by law like motor insurance. While others are to be forced under the terms of the contracts (construction insurance).
Explain what is Cost Stabilization
After collecting funds from signed premium contracts, the company will release funds for investment in the productive side of the enterprise.
This means that more potential profits will be made increasing the capital of the company. In turn, it will be held easily accessible reserves to cover any future losses.
Insurance, therefore, provides a means of stabilizing the costs involved in managing risks by the payment of a fixed and pre-determined amount of premiums for required insurance coverage.
Explain what is Loss Control
It is to reduce the frequency and severity of losses, not just for profit but to contribute the general reduction of economic waste.
Experts are focused on pre-loss control or post-loss control of risks.
Explain what is Social Benefits
For business owners, insurance provides them with funds to recover from a loss to continue employing a large workforce and the production of goods and services to ensure unnecessary economic hardships.
Explain what is Compelled Savings
It is to commit to a compelled long-term savings by putting aside funds for retirement or old age. Life endowment plans provide protection against loss of income in the event of premature death or disablement.
Explain what is Capital Investment
Insurance companies have a large amount of capital at their disposal because there is a time gap between the receipt premium and the payment of the claim.
This allows them to execute short, medium, or long-term investments to build their capital bigger which can also provide a source of capital for industry, commerce, and the government.
Overall, this contributes entirely to the whole economic development of the country.
Explain what is Creation of Employment
The insurance industry provides employment to professionals as well as others in insurance companies, insurance brokering firms, financial advisory, and more.
