There are many types of insurance, and their benefits explain why insurance is important. If you never had throughout you’d need insurance, you would be surprised to realize how the sector has penetrated even to the micro aspects of life. It is a sector that has revolutionized the way we live and the way we do business.
Why Insurance Is Important
1. Financial assistance in cases of losses
Compensation is the fundamental reason you are likely to take an insurance policy. When your property gets damaged or vandalized, there is a demanded cost for restorations and repairs. The restoration costs could be low or significantly high at times. To get a helping hand in restorations, insurance proves important.
In other cases, it is not about your property and belongings but your health. An accident could leave you with temporary injuries and, in unfortunate cases, permanent ones. You will likely lose your ability to earn, and insurance can assist you financially to continue life as usual.
2. Stimulates receiving early medical care
This is the importance of health insurance. When one has life insurance, they are not worried about medical expenses resulting from medical procedures. They head to the prescribed hospital, where their medical insurance cover will be accepted. They get the right medication here, and the insurer bears the cost.
It is different if one does not have medical insurance and they happen to fall ill. One has to look for cash to pay for all expenses resulting from medical care. If the bill is beyond what one has, one must look for external funds from families, friends, and, sometimes, well-wishers. It is not a comfortable position to be in, especially when one struggles with the healing process and medical bills.
3. Provides certainty
When you take an insurance policy, you have the certainty of a potential payout that you could receive from your premiums. When you suffer the risks of loss and file for a claim, you can plan with the payout you receive.
This certainty is established when signing a contract with the insurer to cover your risk of loss. You agree upon the value of your property or life with the insured. This is the value the insured is bound to protect and eventually indemnify you if the risk of loss eventually strikes.
Let us use car insurance as an example. When you take collision coverage, you are assured that the insurance company will repair your car if it gets involved in an accident, regardless of who was at fault. If you take underinsured and uninsured car coverage, you know your car will be repaired if someone without insurance or underinsured hits it.
4. Transfer risks of loss
The insurance sector exists for people who do not want to be liable for damages to their property or themselves sustaining injuries. By transferring the risk of loss, it means that if the feared loss has occurred, the insured will be responsible for repairs or replacement costs where applicable.
By transferring risks, people can live to stress-free lives. One does not have to worry about what will happen if a tree falls on their car in the parking lot. Also, they do not have to worry about what will happen to their income if they suffer insurance; it takes months of healing before they can return to work.
5. Stimulating the economy
There are many ways in which insurance stimulates the economy. One is through creating job opportunities. This helps in the alleviation of unemployment in any economy. Insurance companies employ auditors, investigators, agents, marketers, lawyers, and other professionals. They bring on board different skills and expertise and nurture their careers.
The second way insurance companies help stimulate the economy is by protecting business proceedings. Insurance companies take the risks of insuring stock, plant and machinery, workers, and other business proceedings. When a business has suffered a risk of loss, say a fire outbreak at the warehouse, insurance companies compensate the business, and it is back on its feet as soon as possible.
Compensating a business after an accident at the workplace avoids possibilities of entrepreneurial exit in the economy or loss of jobs to those employees in a business that suffers a risk of loss.
Insurance companies also fund different economic activities. They use premiums not used to pay claims and invest in the economy. These investments may be in stocks, mortgages, or funding start-ups through CSR.
6. Taking care for the welfare of third parties
Taking care of oneself or their business is okay. However, minding about other people’s welfare and well-being creates a unified society where everyone wishes the best for each other. Insurance is such a sector that encourages people to protect the welfare of others.
This is majorly prevalent in car insurance coverage. One can take car coverage to take care of their car and the property of third parties and other road users. If their car damages the property of others, their insurer can intervene and help restore them to their financial status before such a loss.