State the functions of insurance

cbse
business-services

#1

1.Protection : Insurance provides protection against risk of loss due to an uncertain reason. It provides a sense of security in the minds of the businessmen. Therefore, they can concentrate more on the important business decisions in order to increase profitability.
2.Distribution of risk: Insurance is an arrangement pooling of risk. Insurance spreads the risk over a large number of persons who contribute premium, which is used to compensate the person suffering loss.
3.Specialisation : Insurance deals with making the losses of the concerned good. So, the security is provided to the businessman as a result of which he can perform better by concentrating on the core issues of the business necessary for its growth, development and expansion.
4.Better utilisation of funds : Insurance helps in optimum utilisation of resources as there is no need for a businessman to keep huge reserves which would be utilised at the time of loss. The keeping aside of huge reserves is replaced by an insurance premium, which is a very nominal amount.
5.Competitiveness : Insurance reduces the tension of businessmen as a sense of security is provided by the insurance company to the insured which excels the competitive ability of businessmen.
6.Credit facility : Insurance provides credit facility. Loans can be raised against the surity of life insurance policies.