13 June 2010

The Importance of Insurance to the Economy

Still remember Obama’s health care bill which was passed recently?
Why Obama want every citizen of US to have a chance to insured themselves?
Because Obama knows the reasons below…

In reality, insurance cannot protect property or lives, but it can protect those insured against the adverse financial consequences of losing property and lives.

Likewise, an insured person cannot be protected against dying or disease, but the dependent is protected financially if such events occur unexpectedly. In any of such similar cases, the insured would be in economic dire straits if not for the financial protection conferred by insurance.

In short, insurance as an economic device provides the insured with financial certainty in an environment that is filled with the possibility of losses. In providing such benefits, insurance brings peace of mind to people – and to society at large.

Another benefit of insurance is its ability to provide for more optimal use of economic resources. Without insurance, individuals and businesses will have to create and maintain a relatively large contingent fund to meet the risks they have to assume.

To ensure the contingent fund is safe, it will be necessary to invest them in low yielding but secured investment like bank deposits. Effectively, this would deny the individual or business the opportunity to invest these funds more productively.

Imagine if everyone keeping their money in bank accounts?
Imagine if everyone spending lesser?
Imagine if everyone investing lesser?

In fact, our economy needs more and more money flowing, so that to create abundance of opportunities for businesses.

With insurance, the risk of loss is minimized or eliminated through transference or risks from the insured to insurance company. The contingent fund against such risks could also be created immediately.

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