Insurance and its Function

 Insurance plays an important role in contributing economic growth through minimizing the risk of  life and property of insured person and organization. According to maclean insurance is a method of spreading over a large number of persons a possible financial loss too serious to be conveniently borne by an individual. 

Insurance is a legal agreement between two parties. One party may be person ,personnel or organization second party may be private company or government company. 

In other words we can say that insurence is a legal agreement between Insurer and insured in which insured pay premium to insured and insured cover insurence risk. 

* There are many functions of insurance. These functions are as below;- 

1. To minimise risk;- It is the first of function of Insurance.  Every business has risk. Higher the inverstment of business higher the risk in business.  Insurence minimise the risk of business. 

2. To minimise uncertainty - Future is uncertain so every company  worry towards it. Insurence gives us financial protection on the behalf of premium we pay to insured so person organization that feel less uncertainty. 

3. Protection - There are a number of natural or unnatural events happen in economy like Flood, Earthquake, Covid and give us financial loss. Insurance  gives us financial protection if such event happens in economy.

4. Capital formation;- Insurance also plays an important role in capital formation . The ammount they collect from company as premium reinvested in economic growth of company. 

5. Economic growth  - Insurance minimise the risk, uncertaintly of company or organization so company perform their function by effective, efficient way so company contribute their best in economic growth.