Insurance is a form of risk management used against any uncertainty or loss. Wherein, the insurer promises to compensate the insured in the case of a loss in monetary terms. The insured receives a contract, which contains the details of conditions and circumstances under which the insured will be financially compensated.
Any risk that can be measured in terms of money can potentially be insured. An insurance covers the possible unfortunate events like loss of income, death, sickness, accidents, damage to property and many more.
What is the Role and Importance of Insurance?
Insurance is a process of safeguarding the interest of people from loss and uncertainty, and provides more stability in one’s life. It is useful to individuals, group of individuals, business houses and to the society.
1. Provides safety and security:
It provides safety against any uncertainty that might happen in near future. Payment for the loss is made at the time of expiry of the term of insurance (or at the time of death of an insured, in case of life insurance). Life insurance provides safety against premature death and old age sufferings.
Property can also be insured against loss on fire or the loss at a contingency, loss on damage or destruction of goods, property, machines, vehicles etc.
2. Eliminates dependency:
For instance, at the time of death of the husband or father, the family would depend on their relatives, neighbours or friends and might go through a number of sufferings because of their economic dependency on others. But, if the person was insured, it would have eliminated this dependency and would have brought stability in their lives. Life Insurance would assist the family and provide adequate amount at the time of sufferings.
3. Provides Investment Benefits:
Life insurance is a kind of investment as it involves- regular savings, capital formation and return of the capital with some additional amount( or interest). Also, according to tax laws in India, Insurance policies have a special exemption from income tax, wealth tax and gift tax.
4. Old-age heeds:
A person might survive more than his earning period, therefore he requires some provisions. Or otherwise it can cause some serious trouble to him and his family. The life insurance provides old age funds along with the protection of the family by issuing various policies.
5. Medical Support:
A medical insurance is very essential in managing risk in health. Anyone can be unexpectedly fall a victim to critical illness or accidents, medical expenses these days are so high that it becomes a great cause of concern. Medical insurance provides aid for different types
of health problems. Health uncertainties faced by insured will be medically supported by the Medical Insurance Policy.