ESSAY : IMPORTANCE OF INSURANCE IN OUR ECONOMY Insurance

A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional.

Types of Insurances:
Fire and Property Damage business Marine, Aviation and Transport business Motor Third Party Compulsory business Liability business Workers Compensation business Credit and Surety ship business Accident & Health business Agriculture Insurance including Crop Insurance Miscellaneous business Reasons of Insurance: Sometimes in life it is not possible to avoid the losses. For example People may become ill. They may die of illness or accidents or their homes or other property may undergo damage or theft. So in all these cases and they have to face the loss of income or savings. So insurance is a manner of financially insuring that if such an incident comes about then the loss does not affect the present well being of the person. Importance of Insurance: A well-developed and efficiently working insurance sector can play an important role in the economic and social development of a country by reducing uncertainty for economic agents, and pooling long-term financial resources. The insurance industry also contributes in the development of other financial institutions and markets, thus indirectly facilitates economic progress in a country. 1 NADEEM AHMAD KHAN

ESSAY : IMPORTANCE OF INSURANCE IN OUR ECONOMY

Economic security is the most sought after assurance of well being in the modern age of technology. An effective instrument of ensuring security is Insurance-may it be the security of the dependants of the bread-winner or it may be the security of goods lost by the natural, accidental or circumstantial mishaps. Insurance Sector in Pakistan is divided into Life and Non-Life Insurance. Composite Insurance is not allowed under the Insurance Ordinance. An upcoming area is Takaful (Islamic Insurance) for which regulatory regime has been enforced on the initiative of Insurance Division. As man developed his arsenal or weaponry for the protection of his body, he also developed means of economic and financial protection. It emerged in the shape of life and non-life insurance. The subject of life insurance is the human being and the object is to provide financial security, to the dependants of the deceased, while the subject of non-life or general insurance encompasses everything from a pin to a jumbo jet, all goods and property with the object of putting a person back in the same financial position of the loss as he was at the occurrence of the loss. It would, thus; be seen that insurance is the most effective equipment to protect oneself against the horrendous effects of personal or property loss due to disastrous events. The desire of all people has always been, and will always remain, to live a cleaner, healthier, comfortable and easy life. To fulfil this basic need of human beings, enterprises produce and provide goods and services and, in the process, make innovations and inventions. When you make innovations and inventions, you take big risks. An onerous responsibility devolves on the shoulders of innovators and inventors and, while doing this, they play with the lives of people. A small error or lapse can cause numerous side effects which may result in the death or disability of a large number. These types of instances speak of the importance of insurance. Had insurance not been at the back of all these innovators, the world would never have progressed in all walks of our lives. Once this insecurity factor was taken care of, the entrepreneur 2 NADEEM AHMAD KHAN

ESSAY : IMPORTANCE OF INSURANCE IN OUR ECONOMY

started looking for new and more sophisticated machines, robots and gadgets. Atomic energy was harnessed for the progress of man. Booster rockets put the man on the moon. Computers enabled man to acquire answers to the most complicated problems in minutes for which an army of experts took days to solve. Deep seas were exploited and bowels of the earth were torn apart fearlessly to extract wealth for the progress of man. Concords and Jumbo jets were developed and the world shrank to a small size. Medical sciences made tremendous advances and most of the hydraheaded diseases, dreaded by man from times immemorial, have been eradicated, expanding mans life expectancy. All this happened because of insurance support. In all spheres of a mans life, insurance is there to help and assist him, be it motor insurance, or fire or life or any other class of insurance. The helping hand of insurance is always there to protect and provide him financial security. Insurance is also an effective tool for mobilization of savings which helps both in the control of inflation and in capital formation for the development of the country. Thus, it plays a pivotal role in the economic progress of a country. In peace time, the coffers of insurance are open to trade and industry which eventually contributes towards the progress of man. Insurance is a great source of revenue to the national exchequer. In short, Insurance is among the most leading forces contributing towards economic, social and technological progress of man. In other words, progress of insurance is linked with the progress of man. During war, insurance plays its leading role as no other economic activity can. Life insurance finances war efforts, marine insurance provides funds for new ships whenever these vessels are sunk, while fire insurance makes goods the losses sustained due to fire as a result of bombing. Without insurance cover all industrial, economic and social activity of the world will come to a grinding halt. Major trade and commercial contracts will be abandoned, aeroplanes grounded, and vehicular traffic withdrawn from roads. There will be an utter chaos. This shows that insurance is a synonym of human progress, prosperity and civilization. 3 NADEEM AHMAD KHAN

ESSAY : IMPORTANCE OF INSURANCE IN OUR ECONOMY

The advantage of insurance is within you, you will know it when you are already in need of it, the return of it for your investment is something to be considered and put in good look as well. We can always depend on it when the time comes and that right there is advantage for you to have. Insurance have different advantages that you can use as long as you know and understand the basics of it.

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