Benefit of insurance can be divided into these categories -
1. Benefits to Individual
2 Benefits to Business or Industry
3. Benefits to the Society
It can be explained as under -
1. Benefits to Individual
(a) Insurance provides security & safety : Insurance gives a sense of security to the policy holder. Insurance provide security and safety against the loss of earning at death or in old age, against the loss at fire, against the loss at damage, destruction of property, goods, furniture etc.
Life insurance provides protection to the dependents in case of death of policyholders and to the policyholder in old age. Fire insurance insured the property against loss on a fire. Similarly other insurance provide security against the loss by indemnifying to the extent of actual loss.
(b) Encourage Savings : Life insurance is best form of saving. The insured person must regularly save out of his current income an amount equal to the premium to be paid otherwise his policy get lapsed if premium is not paid on time.
(c) Providing Investment Opportunity : Life insurance provide different policies in which individual can invest smoothly and with security; like endowment policies, deferred annuities etc. There is special exemption in the Income Tax, Wealth Tax etc. regarding this type of investment
2 Benefits to Business or Industry
(a) Shifting of Risk : Insurance is a social device whereby businessmen shift specific risks to the insurance company. This helps the businessmen to concentrate more on important business issues.
(b) Assuring Expected Profits : An insured businessman or policyholder can enjoy normal expected profits as he would not be required to make provisions or allocate funds for meeting future contingencies.
(c) Improve Credit Standing : Insured assets are easily accepted as security for loans by the banks and financial institutions so insurance improve credit standing of the business firm
(d) Business Continuation – With the help of property insurance, the property of business is protected against disasters and chance of closure of business is reduced
3. Benefits to the Society
(a) Capital Formation : As institutional investors, insurance companies provide funds for financing economic development. They mobilize the saving of the people and invest these saving into more productive channels
(b) Generating Employment Opportunities : With the growth of the insurance business, the insurance companies are creating more and more employment opportunities.
(c) Promoting Social Welfare : Policies like old age pension scheme, policies for education, marriage provide sense of security to the policyholders and thus ensure social welfare.
(d) Helps Controlling Inflation : The insurance reduces the inflationary pressure in two ways, first, by extracting money in supply to the amount of premium collected and secondly, by providing funds for production narrow down the inflationary gap
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