Importance of Insurance to Society
Insurance is a part and parcel of society today. It offers various advantages to the society as given below:
1. Protects society’s wealth
Through various types of insurance schemes, the insurer protects the wealth of the society. Life insurance offers protection against loss of human wealth. General insurance policies protect the property against losses due to fire, theft, accident, earthquake, etc. As such, both general and life insurances offer protection to stabilize business condition and financial position.
2. Removes social evils
All forms of insurance tend to reduce the extent of social evils that are meant to alleviate. The most effective argument for reduction of fire losses is that smaller losses will make smaller premiums possible.
3. Maintains standard of living
Insurance rescues many people in the society who are rendered destitute through misfortune. They are able to maintain the standard of living due to high returns. They reduce the destitution and misery. These could lower the ideals and standards of conduct of entire communities.
4. Social security benefits
Insurance plays a pivotal role in fulfilling certain needs for which state might have to provide. The provision for old age, sickness and disability of persons in general. Those who have their insurance do not become a burden on state insurance plan.
In case of fire, explosions and other calamities that would tend to impoverish (render poor) families would have been relieved of the financial loss if adequate insurance had been maintained.
5. Equitable distribution of loss
Insurance distributes the cost of accidental events in a equitable manner. In the absence of insurance, this would have been paid in a haphazard manner. For example, the cost of fire insurance is reflected in house rent. In the absence of insurance, some tenants would pay higher rents than others.