Functions of Insurance
Generally, the functions of insurance can be divided into two ways:
i) Primary Function
ii) Secondary function.
Primary Function:
The primary function of insurance are given below:
a) To Prove Certainty: The insurance removes uncertainties. The insured is assured of being compensated for the loss suffered by him. It enables the insured to go ahead with the effective plans for the future,
b) To distribute risk: Another function of insurance is to distribute the risk. In case of mishappening on the life of insured, the aggrieved policyholder is compensated by the insurance company. If fact, the loss is shared among the policy of holders in proportion to the premium collection from them. In fact, insurance is the arrangement of sharing risk among the policy holder.
c) To provide financial protection: Insurance provides protections form probable chances of loss. Businessmen do not have to worry about losses or damage when the risk of loses to their property is duly insured. They will receive compensation against actual loss and their position becomes "as you were" even though the actual loss takes place.
a) To Prove Certainty: The insurance removes uncertainties. The insured is assured of being compensated for the loss suffered by him. It enables the insured to go ahead with the effective plans for the future,
b) To distribute risk: Another function of insurance is to distribute the risk. In case of mishappening on the life of insured, the aggrieved policyholder is compensated by the insurance company. If fact, the loss is shared among the policy of holders in proportion to the premium collection from them. In fact, insurance is the arrangement of sharing risk among the policy holder.
c) To provide financial protection: Insurance provides protections form probable chances of loss. Businessmen do not have to worry about losses or damage when the risk of loses to their property is duly insured. They will receive compensation against actual loss and their position becomes "as you were" even though the actual loss takes place.
Secondary Function:
It includes the following:
a) To mobilize capital: The premium, collected from innumerable policyholders by the insurance company, constitutes huge funds which is used in various income generating activities. The funds raised are invested in productive activities.
b) To increase efficiency: Insurance keeps the businessmen free form worries of various risks. Their self confidence becomes strong. As a result, their work efficiency also increases.
c) To promote the foreign trade: Insurance assists international trade. The international trade among different countries is based on marine, airways and lad route. Chances of fire and marine perils may be in the course of trade transactions. Insurance takes away these risks and promotes foreign trade. Thus, it increases the foreign trade and adds to the efficiency of business.
d) To provide Mental peace: Insurance provides mental peace to the insured. It removes the tensions, fears, anxieties, frustrations or weaknesses of the human mind associated with the future uncertainty. It compensates to the insured whenever any loss occurred due to calamities. People can involve in any profession with the help of compensated money. So, it provides peace of mind and stimulates more and better work performance of an individual.
b) To increase efficiency: Insurance keeps the businessmen free form worries of various risks. Their self confidence becomes strong. As a result, their work efficiency also increases.
c) To promote the foreign trade: Insurance assists international trade. The international trade among different countries is based on marine, airways and lad route. Chances of fire and marine perils may be in the course of trade transactions. Insurance takes away these risks and promotes foreign trade. Thus, it increases the foreign trade and adds to the efficiency of business.
d) To provide Mental peace: Insurance provides mental peace to the insured. It removes the tensions, fears, anxieties, frustrations or weaknesses of the human mind associated with the future uncertainty. It compensates to the insured whenever any loss occurred due to calamities. People can involve in any profession with the help of compensated money. So, it provides peace of mind and stimulates more and better work performance of an individual.
