Importance of Insurance

Importance of insurance

1. Continuity of the business

   Insurance provides compensation to the insured. In the event of loss, the business is able to continue.

2. Collateral security for credit

   A life insurance policy may be used as security to obtain a loan (this is because the loan will be paid to the creditor even when the debtor dies).

3. Savings

   Insurance can be used as a form of savings by policy holders; the savings can then be used in the future.

4. Create employment

   It creates employment opportunities in the economy, e.g. managers, assessors, actuaries, etc.

5. Surrender 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 has already paid some premium.

6. Credit facilities

   Insurance companies advance loans to their policy holders for personal development.

7. Economic growth

   This is due to revenue collected by the government from different insurance companies.

Procedures for taking out an insurance

The following are steps involved in taking out an insurance.

1. The person wishing to be insured fills in a proposal form, which constitutes his application for insurance. He is required to disclose all the material facts about the property he wants to be insured and state clearly the risks insured against.

2. On receipt of the proposal form, the insurer's agents calculate the premium. They may arrange to inspect the property before accepting the premium.

3. The insured pays the premium and is issued with a cover note, which is a proof that the premium has been paid and accepted by the insurer, who now undertakes to indemnify the insured.

4. Within 30 days of the issue of the cover note, the insurer issues the policy.

5. If the events insured against happen, the insured is required to notify the insurer and fill in a claim form to claim compensation.

6. The insurer now arranges for the survey of the property to assess the extent of losses. On receipt of the survey report, the insurer pays the due compensation to the insured.