Importance Of Insurance

An insurance is an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium. In simple words, it 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.

There are many advantages of insurance, the main one being the economic protection in times of tragedies. Financial security to the nominee is provided in case of the premature death of the insured. Covering the loss of property due to fire, theft or natural calamity also comes under the scope of insurances.

Since this a co-operative device, the risk of the insured is shared and reduced if not completely eliminated. It helps to maintain the standard of living in case of a financial crisis. It also serves as medium for encouraging regular saving and cutting down on unnecessary expenses. The life insurance policy reduces the dependency of people and makes them self-sufficient.

Moreover, an insured can get the facility of a loan from an insurance company or can take loans from other institutions through the security of insurance policy.

Banks prefer the insured assets as collateral for providing a loan and it serves as a major support system in a person's economic life.

Insurance companies can be private as well as government-owned. One of the many examples is the Life Insurance Corporation of India, established on September 1, 1956 which is government-owned life insurance company and promises integrated financial assistance during the times of crisis.

In a world of unprecedented predicaments, frequent financial havoc and unwonted situations, it is imperative that we become responsible and foresighted for our own sake and that of our family. We must remain abreast of such facilities and policies and avail of the same, judiciously and astutely.

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