What Are the Benefits of Insurance?

Insurance companies offer many different products, each of them offering some type of protection against loss to the policyholder in exchange for premium payments. Each provides benefits by reducing the consumer's risks and inspiring increased peace of mind. Additionally, in some cases, people or businesses are required to have certain types of insurance in order to protect others.

An insurance policy pays you or the designated recipient when a covered loss is realized. The drawback to buying insurance, in many cases, is that you're paying for something you hope you'll never have to use.

Importance and Benefits of Insurance for Business and People
Importance of Insurance to Businessmen

  • Security and Safety: It gives a sense of security and safety to the businessman. It enables him to receive compensation against actual loss. He can concentrate on his business with a secure feeling that in case of losses arising from insurable risk, his losses will be compensated.
  • Distribution of risk: Risk in insurance is spread over a number of people rather being concentrated on a single individual.
  • Normal expected profit: An insured trader can enjoy normal margin of profit all the time. He is protected from unexpected losses because of insurance.
  • Easy to get loans: A trader can get bank loans easily if his stock or property is insured, as insurance provides a sense of security to the lenders.
  • Advantages of Specialization: Businessmen can concentrate on their business activities without spending more time on safeguarding their property. The insurance companies, on the other hand, can provide specialized insurance services.
  • Development of Social Sectors: Insurance funds are available for economic development particularly for the development of social sectors. Especially for a developing country like India, insurance funds are an important source for investing in infrastructure projects (roads, power, water supply, telecom etc).
  • Social cooperation: The burden of loss is shouldered by so many persons. Thus, insurance provides a form of social cooperation.

Benefits of Insurance

Insurance is important because both human life and business environment are characterized by risk and uncertainty. Insurance plays a key role in mitigation of risks. The benefits of insurance are discussed below:

Benefits of Insurance to insured

  • Insurance provides security against risk and uncertainty.
  • It enables the insured to concentrate on his work without fear of loss due to risk and uncertainty.
  • It inculcates regular savings habit, as in the case of life insurance.
  • The insurance policy can be mortgaged and funds raised in case of financial requirements.
  • Insurance policies, especially pension plans provide for income security during old age.
  • The insured gets tax benefits for the amount of premium paid.
  • Insurance of goods may be a mandatory requirement in certain contracts.

Benefits of Insurance to society

  • Insurance is an important risk mitigation device.
  • Insurance companies provide the required funds for infrastructure development.
  • It provides a sense of security
  • Insurance provides security to the insured during his life and to his dependents.
  • It provides employment opportunities. With the entry of private insurers employment opportunities have increased greatly.
  • Insurance provides a sense of livelihood to those who might otherwise not have an income source — housewives, retired people, students etc can work as agents and earn commission.
  • Insurance works on the principle of pooling of risks and distributes risks over many people.
  • Insurance is an invaluable aid to trade.

Benefits of Insurance to the Nation

  • Insurance provides funds to the government for providing basic facilities and to develop infrastructure.
  • It has enabled the country to get foreign exchange.
  • Insurance relieves the government of the burden of supporting a family, in case of the untimely demise of the breadwinner.
  • Insurance promotes trade and industry by providing risk cover.
  • Insurance companies pay taxes out of profits earned. This is an important revenue source to the government.

Some Important tips :

  • Standard Insurance includes protection in case of theft, physical damage, and personal liability. Adequate liability coverage may be the primary concern for auto insurance.
  • The limits of liability are important. If the limits are not enough to satisfy any legal suits, then you may have to bear those expenses out of pocket. Tip: Always carry umbrella insurance for $ 1 million dollars.
  • Discounts are available for Student drivers with excellent GPAs. You get 10% discount if you have taken Defensive Driver Training Certificate.
  • If you own a home and an auto and insure both with the ae insurance company, the you get 'multiple property discounts. If you are accident free for three straight years, you get automatic discounts.
  • Rental Car Insurance: Most of the insurance companies covers rental insurance. You have to call the insurance company before you drive the rental car. Some credit cards also cover rental car insurance. Some credit card provide primary coverage like Chase Sapphire Preferred Visa and United Mileage Explorer.

Home Insurance Tips

  • Take an insurance policy which covers "Replacement Cost". Even better would be, "Extended replacement cost" on your house. This covers the cost of building a home in today's cost. The replacement cost is $ 130.00 per sq. ft times the area of the home in Queens/Long "Island area.
  • The policy should include "liability coverage" This covers any injury to third party on the owners property. An umbrella policy for $ 1 million cost roughly about $ 100.0 per annum and should be taken. The liability insurance should cover the legal costs settlements arising out of any injury to someone or to their property.
  • Discounts are available for smoke detectors, burglar alarm, fire extinguishers, sprinkler system and deadbolt locks.
  • The policy should include "loss of use". This covers for what it will cost to live elsewhere while the insured property is being replaced.
  • The policy should also cover contents at "Replacement value" including contents in the "locker" with a bank. Do not go for "cash value" as it only takes into account depreciated value of the item.
  • Always take insurance whether buying a co-op or a condo or a house.
  • You can get a copy of your homes claim history for $ 9.00. It is called the CLUE report (Comprehensive Loss Underwriting Exchange) and you can get it from You can get a report from Atlanta based Choice Point. Choice point compiles also other types of information such as medical, auto insurance, credit ratings and employment history.
  • Deductible: A deductible is the amount you pay before he insurance policy kicks in. Choose the highest deductible. A deductible for at least $ 1000.00 will reduce the monthly premiums substantially.
  • Standard Policies do not cover damages from earthquakes and floods because they are very expensive and are very prevalent. Check out Federal Emergency Management Agency at 800-480-2520 or
  • Buy Flood insurance as a rider if the basement gets flooded.
  • Maintain a good credit report. Insurance are based on credit scores. A good credit score reduces the insurance rates. Get separate insurance for expensive contents like jewelry, computers and art work. You may need this as a rider. Tip: If you have expensive jewelry then you should carry separate insurance after getting valuation from approved institutions.
  • You will get multi insurance discounts if you insure house, cars and liability insurance with the same insurance company.
  • You should have liability coverage of at least more than the net worth. In case there is a lawsuit, the lawyer should look at the insurance policy not at the net assets.
  • Personal articles: You should have enough coverage for personal articles including jewelry, rugs, paintings or antiques. This floater will cost about $100.00 per year.
  • Make sure that the insurer has inspected the house when the insurance is taken and when the claim is being made.
  • Check out @ to find out how much you need to insure your house, in order to rebuild.
  • Check out to look at the aerial view and estimated market value of the property you are planning to buy.
  • If you have swimming pool or a trampoline in the backyard, you should inform the insurance company. Also, if you have pets you should inform the insurance company.