Meaning of the insurance

The world we live in is full of uncertainties and risks. Individuals, families, businesses, properties, and assets are exposed to different types and levels of risks. These include the risk of loss of life, health, assets, property, etc. Although it is not always possible to prevent undesirable events, the financial world has developed products that protect individuals and businesses from such losses by compensating them with financial resources. Insurance is a financial product that reduces or eliminates the cost of losses or the impact of losses caused by various types of risks.

The insurance sector not only protects individuals and businesses from many types of potential risks but also contributes significantly to the overall economic growth of the country by providing stability to businesses and long-term funding for industrial projects. Among other things, the insurance sector also promotes the virtue of saving among people and creates jobs for millions of people, especially in a country like India where saving and employment are important.

Let's understand in detail how and why the insurance sector is key to the development of any economy.

They provide security for individuals and businesses:

Insurance provides financial support and reduces the uncertainties faced by individuals and businesses at every stage of their life cycle. They provide an ideal mechanism for mitigating risk in the event of events that can cause financial distress to individuals and businesses. ).

With medical inflation increasing by approximately 15% annually, even simple medical procedures can wreak havoc on a family's well-calculated budget, but health insurance would provide financial protection for the family. In the case of business insurance, financial compensation is provided for financial losses due to fire, theft, accidents related to shipping activities, other accidents, etc.

Generates long-term financial resources:

The insurance sector generates funds through premiums from millions of policyholders. Since these funds are long-term, they are invested in the construction of long-term infrastructure assets (such as roads, ports, power plants, dams, etc.) that are important for nation-building. Large investments that lead to capital formation in the economy will increase employment opportunities.

Promotes economic growth:

The insurance sector has a significant impact on the overall economy by mobilizing domestic savings. Insurance transforms accumulated capital into productive investment. Insurance also provides cushioning against losses, and financial stability, and promotes trade and commerce, leading to sustained economic growth and development. Thus, insurance plays a crucial role in the sustainable growth of an economy.

Provides family support during medical emergencies:

The well-being of the family is important to all of us and the health of family members is the number one concern for most. From elderly parents to newborn children, medication and hospitalization play an important role in ensuring the well-being of families.

Soaring medical treatment costs and soaring drug prices are enough to eat away at your savings if you're not well prepared. Anyone can unexpectedly become a victim of a serious illness (such as a heart attack, stroke, cancer, etc.). And rising medical costs are a major concern.

Health insurance is a policy that protects people financially against various types of health risks. With health insurance, the insured person receives financial support in the event of a medical emergency.

Spread Risk:

Insurance facilitates the transfer of risk of loss from the insured to the insurer. The basic principle of insurance is to spread the risk over a large number of people. A large part of the population takes out insurance policies and pays premiums to the insurer. Every time a loss occurs, it is offset by funds raised from millions of policyholders.