Overview
Insurance provides many benefits to individuals, families, businesses, and society as a whole. These benefits include:
- Indemnifying for the costs of covered losses;
Indemnifying for the Costs of Covered Losses
Consider the aftermath of a loss for those who have no insurance to recognize the value of payment for losses.
lf fire destroys the home of a family with no insurance, the family members may be left without the financial resources to repair their home or to replace their belongings; they may also have no place to live. A business can incur bankruptcy as the result of a liability judgment it cannot pay, and the employees and owners of the business are suddenly unemployed.
By indemnifying insureds, insurance provides some degree of financial security and stabiliiy for individuals. families, and businesses.
- Reducing the insured’s financial uncertainty;
lnsurers have greater certainty than individuals about losses, because the law of large numbers enables them to predict the number of losses that are likely to occur and the financial effects of those losses.
Because insurance provides financial compensation when covered losses occur, it reduces the uncertainty created by many loss exposures.
A family's major financiai concerns, for example, often center on the possibility of a wage earner's death or the destruction of a home. If the family transfers the uncertainty about the financial consequences of such ‘losses to an insurer, the famiiy practicaily eliminates these financiai concerns.lnsurers have greater certainty than individuals about losses, because the law of large numbers enables them to predict the number of losses that are likely to occur and the financial effects of those losses.
- Promoting insurers’ loss control activities;
Insurers often promote loss control by wcommending loss control techniques that people and businesses can implement.
Loss control means taking measures to prevent some losses from occurring or to reduce the financial consequences of losses that do occur.
Individuals, families, and businesses can use loss control measures such as burglar alarms, smoke alarms. and dead boll locks to prevent or reduce property loss exposures. Loss control generally reduces the amount of money insurers must pay in claims,
Consequently. loss control helps to improve the financiai results of insurers and to reduce insurance costs to consumers. Thus, society benefits from activities that prevent and reduce losses.
- Using resources
People and businesses that face an uncertain future often set aside funds to pay for future losses. Insurance makes it unnecessary to set aside a large amounl of money to pay for the financial consequences of loss exposures that can be insured.
Money that would otherwise be set aside to pay for possible losses can be used to improve a family's quality of life or to contribute to the growth of a business. In exchange for a relatively small premium, families and businesses can free up additional funds that they would otherwise need to reserve to pay for unforeseen future tosses, such as the loss of a house because of fire.
Insurers often promote loss control by wcommending loss control techniques that people and businesses can implement.
Loss control means taking measures to prevent some losses from occurring or to reduce the financial consequences of losses that do occur.
Individuals, families, and businesses can use loss control measures such as burglar alarms, smoke alarms. and dead boll locks to prevent or reduce property loss exposures. Loss control generally reduces the amount of money insurers must pay in claims,
Consequently. loss control helps to improve the financiai results of insurers and to reduce insurance costs to consumers. Thus, society benefits from activities that prevent and reduce losses.
- Using resources
People and businesses that face an uncertain future often set aside funds to pay for future losses. Insurance makes it unnecessary to set aside a large amounl of money to pay for the financial consequences of loss exposures that can be insured.
Money that would otherwise be set aside to pay for possible losses can be used to improve a family's quality of life or to contribute to the growth of a business. In exchange for a relatively small premium, families and businesses can free up additional funds that they would otherwise need to reserve to pay for unforeseen future tosses, such as the loss of a house because of fire.
- Providing support for credit;
Before making a loan, a lender wants assurance that the money will be repaid. When a lender loans money to a borrower to purchase properly, the lender usually acquires a legal interest in that property.
The lender often can repossess a car or foreclose a home mortgage if the loan is not repaid. However, the lender would be less likely to make loans if it did not have some assurance of getting back its money if the car or house were destroyed or if the borrower died or became disabled before the loan
was paid in full. 5 to individuals and businesses by guaranteeing
Hateral for the loan (such as a house or a damaged by an insured event, thereby
Insurance facilitates loan
that the lender will be paid if the co commercial building) is destroyed or reducing the lender's uncertainty.
- Satisfying legal requirements;
Insurance is often used or required to satisfy legal requireme -ts.
In many states‘ for example, automobile owners must prove they have auto liability insurance before they can register lheir autos.
All states have laws that require employers to pay for job-related injuries or illnesses of their employees, and employers generally purchase workers‘ compensation insurance to meet this financial obligation.
- Satisfying business requirements;
Certain business relationships require proof of insurance. For example, building contractors are usually required to provide evidence of liability insurance before a construction contract is granted.
In fact, almost anyone who provides a service to the public. from an architect to a tree trimmer, may need to prove that he or she has iiability insurance before being awarded a contract for services.
- Providing a source of investment funds;
One of the greatest benefits of insurance is that it provides funds for investment. When insurers collect premiums, they usually do not need funds immediately to pay losses and expenses. Insurers use some of these funds to purchase stocks and bonds.
Investments provide businesses with money for projects such as new construction, research, and technology. Investment funds promote economic growth and job creation.
Investment brings additional funding to insurers in the form of interest; this additional income helps to keep insurance premiums at a reasonable level for individuals and businesses‘
Insurers also invest in social projects, such as cuitural events, education, and economic development.
- Reducing social burdens.
Uncornpensated accident victims can be a serious burden to society. Insurance helps to reduce this burden by providing compensation to such injured persons.
Without insurance, victims of job-reiated injuries or auto accidents may need state welfare or the assistance of another social program.
Workers‘ compensation insurance provides payment to injured employees for medical expenses, lost wages, and rehabilitation, as well as death benefils to survivors of employees killed by workplace accidents or diseases.
Compulsory auto insurance is another example, because it provides compensation to auto accident victims who may otherwise be unable to afford proper medical care or who may be unable to work.
Before making a loan, a lender wants assurance that the money will be repaid. When a lender loans money to a borrower to purchase properly, the lender usually acquires a legal interest in that property.
The lender often can repossess a car or foreclose a home mortgage if the loan is not repaid. However, the lender would be less likely to make loans if it did not have some assurance of getting back its money if the car or house were destroyed or if the borrower died or became disabled before the loan
was paid in full. 5 to individuals and businesses by guaranteeing
Hateral for the loan (such as a house or a damaged by an insured event, thereby
Insurance facilitates loan
that the lender will be paid if the co commercial building) is destroyed or reducing the lender's uncertainty.
- Satisfying legal requirements;
Insurance is often used or required to satisfy legal requireme -ts.
In many states‘ for example, automobile owners must prove they have auto liability insurance before they can register lheir autos.
All states have laws that require employers to pay for job-related injuries or illnesses of their employees, and employers generally purchase workers‘ compensation insurance to meet this financial obligation.
- Satisfying business requirements;
Certain business relationships require proof of insurance. For example, building contractors are usually required to provide evidence of liability insurance before a construction contract is granted.
In fact, almost anyone who provides a service to the public. from an architect to a tree trimmer, may need to prove that he or she has iiability insurance before being awarded a contract for services.
- Providing a source of investment funds;
One of the greatest benefits of insurance is that it provides funds for investment. When insurers collect premiums, they usually do not need funds immediately to pay losses and expenses. Insurers use some of these funds to purchase stocks and bonds.
Investments provide businesses with money for projects such as new construction, research, and technology. Investment funds promote economic growth and job creation.
Investment brings additional funding to insurers in the form of interest; this additional income helps to keep insurance premiums at a reasonable level for individuals and businesses‘
Insurers also invest in social projects, such as cuitural events, education, and economic development.
- Reducing social burdens.
Uncornpensated accident victims can be a serious burden to society. Insurance helps to reduce this burden by providing compensation to such injured persons.
Without insurance, victims of job-reiated injuries or auto accidents may need state welfare or the assistance of another social program.
Workers‘ compensation insurance provides payment to injured employees for medical expenses, lost wages, and rehabilitation, as well as death benefils to survivors of employees killed by workplace accidents or diseases.
Compulsory auto insurance is another example, because it provides compensation to auto accident victims who may otherwise be unable to afford proper medical care or who may be unable to work.
