Advantages of insurance or Importance of insurance in modern business

We discuss major advantages of insurance under these headings:

1.Removal of uncertainties:-
Insurance company takes the risks of large but uncertain losses in exchange for small premium. So it gives a sense of security, which is real gift to the businessman. If all certainty could be removed from business, income would be sure. Insurance removed many uncertainties and to that extent is profitable.

2. Stimulant of business enterprise:-
Insurance facilities to maintain the large size of commercial and industrial organizations. No large scale industrial undertaking could function in the modern world without the transfer of many of its risks to insurer. It safeguards capital and at the same time it avoids the necessity on the part of industrialists. They are therefore free to use their capital as many seem best.

3. Promotion of saving:-
Saving is a device of preparing for the bad consequences of the future. Insurance policy is often very suitable way of providing for the future. This type of policy is found particularly in life assurance. It promotes savings by making it compulsory which have a beneficial effect both for the individual and nation.

4. Correct distribution of cost:-
Insurance helps maintain correct distribution of cost. Every businessman try to pass on to the customer all types of costs including accidental and losses also. In the various fields insurance such losses are correctly estimated keeping in view a vast number of factor bearing on them. In the absence of insurance these losses and costs would be assessed and distributed only by guess work.

5. Source of credit:-
Modern business depends on largely credit , insurance has contributed a lot in this regard. A life insurance policy increases the credit worthiness of the assured person because it can provide funds for repayment if he dies. Credit extension is also obtained by means of various kinds of property insurance . Business man who stock of goods has been properly insured can get credit easily. Similarly marine insurance in an essential requirement for every transaction import and export.

6. Reduction of the chances of loss:-
Insurance companies spends large sums of money with a view to finding out the reasons of fire accidents, theft and robbery and suggest some measure to prevent them. They also support several medical programmed in order to make the public safety minded. Without such losses preventive activities if insurance companies, the chances of loss would have been greater than they are at present days.

7. Solution of social problems:-
Insurance serves as a useful device for solving complex social problems e.g. compensation is available to victims of industrial injuries and road accident while the financial difficulties arising from old age, disability or death are minimized. It thus enables many families and business unites to continue intact even after a loss.

8. Productive utilization of funds:-
Insurer accumulates large resources from the various insurance funds. Such resources are generally invested in the country, either in the public or private sector. This facility considerably in over all development of the country.

9. Insurance as an investment:-
A life policy is a combination of protection and investment which serves a useful purpose. The premium that the insured pays go on accumulating in a fund every year. The sum of accumulated by the insurance company earn interest. Under life assurance a person may also invest his capital in a annuity which will pay him an income every year till death. Therefore, insurance may be regarded as an investment.

10. Promotion of international trade:-
The growth of international trade of the country has been greatly helped by shifting of risk to insurance company. A ship sailing in the sea faces some miss-fortune. A fire breaks out and burns to ashes all the merchandise of a business man. But the insurance is one of the devices by these which risks may be reduced or eliminated. So industrialists and exporter may devote their full attention toward the promotion of business which may increase the export activities.

11. Removing Fear:-
Insurance helps to remove various types of fear from the mind of the people. The insured is secured in the knowledge that the protection of the insurance fund is behind him if some sad event happens. It thus creates confidence and eliminates worries which is difficult to evaluate, but the benefit is very real.

12. Favorable allocation of factors of production:-
Insurance also helps in achieving favorable allocation of the factors of production. Capital is usually shy in risky business. People hesitate to invest their capital where financial losses are great. If protection is provided against these risks by means of insurance, several investors will become ready to invest funds in those fields.

13. Growth of business competition:-
Insurance enables the small business units to complete upon more equal term with the bigger organization. Without insurance it would have been impossible to undertake the risks themselves. On the other side bigger organization could absorb their losses due to great financial strength. Moreover insurance remove uncertainty of financial losses arising out of of the certain causes. It thus increases knowledge which is one of the most important preconditions of perfect competition.

14. Employment opportunity:-
Insurance provides employment opportunity to jobless persons which is helpful for the improvement and progress of social condition.

15. Miscellaneous benefits:-
( a ) It establishes the relation between the employed and employer by providing various facilities i.e. group life insurance, social security scheme, retirement income plan, workman's compensation insurance.
( b ) Insurance creates the confidence and some sense of security among the policy holder.
( c ) Insurance company provides valuable services of skilled and expert persons to industries and business in order to eliminate various risks.
( d ) It promotes economic growth and development. This would be impossible in the absence of insurance.
( e ) It contributes to the efficiency of business and also industrial and commercial executives.
( f ) Security of dependents is made possible through life assurance. It gives relief to helpless families after the death of the earning member of the family.