- Helps in creation of employment as individuals are employed as managers,accountants,sales persons in different insurance companies.
- It ensures continuity of business-this is through compensation after a risk.
- Ensures social welfare-the burden after a risk is shared and thus no difficulty.
- It is a collateral for credit e.g. life assurance acts as a security to access credit.
- Helps in proper utilization of finances.
- It helps in promoting economic growth-here profits are invested ie engage in professions that will give money
- Helps in surrendering value-this is the amount that an insurance company is prepared to pay if the insured no longer wishes to continue with the insurance contract and had already paid some premiums
- Savings-insurance can be used as a form of saving,policy holders.The savings can then be used in the future.
- Credit facilities-insurance companies advance loans to their policy holders for personal development
Compensation is only paid if the loss borne is caused the occurrence of the insured risk. The insurer provides the insured with a document called a policy.This is a contract between the insurer and the insured,who is also referred to as the policyholder,that the insurer will compensate the insured incase a loss occurs due to the specified insured risk.The insured party will pay a specified premium usually on a regular basis.
Compensation=sum insured/total value of property insuredxloss.