Following functions are performed by insurance :
(i)Providing certainty : Insurance provides certainty of payment for the risk of loss due to happening of uncertain events. There are uncertainties of happenings of time and amount of loss. Insurance provides certainty to the assured for payment compensation against such losses. .
(ii)Protection : Though Insurance can’t stop the happening of risk or event but provides protection against losses arising out of it.
(iii)Risk sharing : The another important function of insurance is risk sharing. On the happening of a risk/event the loss is shared by all persons exposed to it. The share is obtained from every insured member by way of premium.
(iv)Assist in capital formation : The accumulated funds received by way of premium paid by the insured are invested by the insurer in various income generating schemes. Thus, assisting in capital formation.