Insurance Meaning Importance and Types
Importance of Insurance
- Protection against risk:
Insurance provides protection against various risks involved in business. Insurance can provide compensation for the loss suffered by the insured.
- Sharing of Risk:
Insurance helps in sharing of risk. A large number of people seek insurance by paying the premium. Premium results in the formation of insurance fund which is used for compensating those who may suffer a loss.
- Helps in Securing Loans:
Insurance makes it convenient to secure loans and advances from the financial Institutions. Lending companies want insurance of goods and properties before loans are sanctioned on their security.
- Protection Against Liabilities under various Labour Laws:
Insurance gives protection to businessmen in the event of loss. Compensation is paid to employees for accidents leading to fatal injury, partial injury, disablement, as well as sickness and maternity.
- Contribute to Economic Development:
Funds with the insurance companies are Invested in various types of securities and projects. This contributes to economic development of the country.
- Generation of Employment:
Insurance companies provide employment to a large number of people on regular basis. A number of people earn their livelihood working as insurance agents.
- Social Security:
Life insurance provides security against risks of old age and premature death of people. Besides, it provides social security to workers through the Employees State Insurance (ESI) scheme. Thus, it covers accidental risks.
Insurance Meaning Importance and Types
Types of Insurance
Apart from the main types, life, fire and marine insurance, general insurance companies insure a variety of other risks. Some of these risks and the different policies are:
- Motor Vehicles Insurance:
Insurance of cars, vans, commercial vehicles, motorcycles, scooters, etc., covers the risks of damage of the vehicle by accident, loss by theft, and so also the liability arising out of injury to, or death of a third party Involved in the accident.
- Health Insurance:
It provides protection against the medical expenses incurred on treatment of illness or injury suffered by the policyholder. It is also termed as Mediclaim Insurance and is one of the most popular types of insurance.
- Crop Insurance:
It protects the farmers from the loss suffered due to crop failure because of drought or flood.
- Cash Insurance:
It protects the banks and other business establishment against loss of money in transit.
- Cattle Insurance:
It covers the risk of loss due to the death of a cow, buffalo, heifer, bull, etc. caused by accident, diseases etc.
- Rajeswari Mahila Kalyan Bima Yojana:
It provides relief to the family members of the insured women in case of her death or disablement.
- Amartya Siksha Yojana Insurance Policy:
This policy is for the education of dependent children, in case the insured parents sustain any bodily injury causing death or permanent disablement.
- Burglary Insurance:
In this case, the insurance company undertakes to indemnify the insured against losses from burglary.
- Fidelity Insurance:
Insurance covers the risk of loss on account of fraud and dishonesty involving embezzlement or misappropriation of goods or cash by employees.