Beginner guide: Benefits of Insurance

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. The amount of money paid by an individual or organization for insurance (cover/protection) to an insurance company is called the premium.

Benefits of insurance

  • Insurance enables individuals and organizations not to suffer the financial loss that would result from the occurrence of an insured risk. Insurance therefore;
  • Provides payment for covered losses when they occur. The uncertainty of paying for losses out of-pocket reduces significantly thus managing cash flow.
  • Gives a peace of mind thereby enabling investments of larger amounts of money
  • Provides financial protection to dependants in case of death of the breadwinner (Life insurance)
  • Provides savings for future prosperity in case of life insurance
  • It’s a means of mobilizing investment funds. When insurance companies collect premiums, they invest those premiums in a variety of investment vehicles, and pay claims when they occur.
  • Controls and reduces losses through surveys and provides risk improvement advice to the public and those insured
  • Enables continuity of micro businesses that depend on the insured business
  • Reduces individual burden on society such as education of the children after the death of the breadwinner.
  • Reduces the burden of loss since many people shoulder the loss thus providing a form of social cooperation.

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