Importance of insurance

Business studies study module
  1. Continuity of business

Every business enterprise is exposed to a variety of risks e.g. fire, theft e.t.c.The occurrence of such risks often result in financial losses to the business. Insurance provides adequate protection against such risks in that, if a trader suffers losses as a result of insured risk, she/he is compensated, thus he/she is able to continue with business operations.

  1. Investment projects

Insurance enables investors to invest in profitable yet risky business projects that would otherwise avoided.

Not all the money received as premiums (the insurance companies) is used up for compensation to those who have been exposed to risk and suffered losses. The rest of the money is invested in other businesses to earn profits.

  1. Creation of employment

Insurance does provide employment opportunities to members of the public.

  1. Government policy

The profits earned are a source of revenue for the government i.e. insurance companies are profit-making organizations which generate revenue to the government through payments of taxes

  1. Credit facilities

The insurance industry have also established credit or lending facilities which the business community uses borrowing. Loans are made available to the public for different investment projects in different sectors of the economy and also for personal requirements.

  1. Development of infrastructures

The insurance industry plays a crucial role in the development of urban facilities in major towns. Both residential and office buildings have been developed insurance firms. The firms also participate in development projects in the areas where they operate. They contribute to development of a region constructing and infrastructural facilities

7. Life policies can be used as security for loans from either the insurance company or other financial institutions.

8.Provision of life and general insurance policies encourages Kenyans to plan ahead for their dependants therereducing the number of needy future students.

9.Loss prevention-The insurance companies encourage the insured not to cause accidents thus channeling the unclaimed resources into the economy.

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