1) Economic protection is provided by insurance:
People and their property are protected economically by insurance. The property may be damaged or lost due to events such as fire, flood, lightning, earthquake, theft, or breakdown in machinery. Insurers provide financial protection against losses caused by specific risks to property. The property is not protected from any risk by insurance nor is it able to avoid any risk.
Losses cannot also be reduced by it. Such financial losses are only indemnified by it. The occurrence of fire cannot be prevented by a fire insurance policy. As a result, it compensates property owners for fire-related losses.
2) Investment:
Investment of life insurance funds for future needs, such as education, marriage of children, retirement income, etc., is another important function of life insurance. Regular premium payments over many years provide insurance protection as well as a large investment. In this way, insurance generates investment by collecting a small amount of premium, helping people meet their future economic needs.
3) Tax Benefit :
Apart from providing insurance protection to policyholders, it also allows them to get income tax relief based on the amount of premiums paid during the year. In this way, income tax can be saved through insurance. In this way, the insured receives a tax rebate and his tax liability is reduced.
4) Insurance Acts as a Social Security Device:
As a social security device, insurance has become increasingly important in recent years. A number of insurance schemes are being designed by the state so as to provide lower or subsidized premiums to rural people, farmers, workers, and artisans who are economically and socially weaker. Insurers have contributed to the state’s ability to maintain social stability and peace, reduce the economic burden on the society, and fulfill its social responsibility.
5) Business Needs Insurance Protection:
It is also important for businesses to have insurance protection. A business insurance policy protects its investment against various risks, ensures continuity of operations, and thus boosts business growth. Fire, flood, earthquake, theft, etc., may cause damage to factory buildings, machinery, equipment, inventories, etc.
Employees are also protected against fraud, dishonesty, and misappropriation of funds. Foreign trade risks, currency fluctuations, political instability, etc., can also be insured. It is possible to reduce economic tension and fear of loss as well as discontinuity of business as a result.
6) Uncertainty protection:
Business and human life are made less uncertain by insurance systems because they provide financial support. It is important to note, however, that insurance doesn’t protect the property from any peril or risk. In contrast, insurance only compensates financial losses that occur due to unforeseen circumstances. The purpose of insurance is to provide protection against uncertainty.
7) Provision against unexpected death :
Uncertainty and risk are part of every person’s life. Unexpected events, such as early death, can lead to the end of a person’s life. An accident may result in partial or total disability causing a person’s life to become non-functional. Financial compensation is provided to dependents by insurance systems.
8) Financial resources can be generated by Insurance:
Small amounts of premiums collected from policy holders generate huge funds for insurance companies. Bonds, stocks, and government securities are invested with these funds. Additionally, it contributes to the nation’s economic development through industrial development. Collective investments can increase employment opportunities.
9) In order to improve labour welfare:
When a unforeseen event occurs at the work place, and employees or workers get injured while at work, insurance provides them with financial compensation. Providing financial assistance as compensation is one of the key functions of insurance as a tool for increasing labour welfare.
10) Support for medical needs:
The pattern of life style today is rapidly changing. The level of pollution in the environment has increased tremendously as a result of modernization and industrialization. Health risks increase as a result. It is possible for anyone to suffer from a critical illness. It has become increasingly difficult to afford medical care. Different types of health risks can be met with medical insurance. A medical insurance policy provides coverage for medical expenses for policy holders.
11) Useful to partnership firm :
Upon the death of a partner in a partnership firm, the remaining partners must pay the decedent’s share to the decedent’s heirs. There is a good chance that the business will be closed down. The legal heirs of the deceased partner are compensated by the insurance company in such a case.
12) Savings Encouraged:
Citizens develop a saving habit as a result of insurance. Paying regular premiums encourages people to save systematically. When the policy matures, the insured receives a lump sum payment.