Question

Discuss the advantages of insurance to businessmen.

Answer 1

1. Protection against risk: Business is full of risks. Many of the business risks can be covered by insurance. In the absence of insurance, a business may be completely wiped out by a sudden loss.
2. Increase in business efficiency: Insurance removes uncertainty and relieves businessmen of mental tension. They are encouraged to work hard and improve the efficiency of business operations. Insurance helps in the expansion of business by providing a sense of security.
3. Financial assistance: Insurance increases the capacity of businesses to borrow. A businessman can raise a loan by pledging a life insurance policy as collateral security. Moreover, redeemable debentures can be issued as collateral security for capital redemption policies.
4. Insurance of key employees: Key employees are those employees whose absence or incapacity will cause a tremendous reduction in the income of the business. The survival and growth of businesses depend on such employees. They are the most valuable asset of a business. Life policies can be taken to protect against the loss arising out of the death, disability, etc., of key executives.
5. Continuity of operations: Insurance policies provide adequate funds in the event of loss so that a business may be rebuilt and carried on without much interruption or delay. Insurance ensures the stability of the business.
6. Employee welfare: Through insurance, a businessman can make provisions for the old age, disability, premature death, etc., of his employees. Such provision motivates the employees to work hard and enables the employer to fulfil his legal and social responsibility towards the employees.
7. Expert advice: Insurance companies employ a number of experts who render valuable technical and financial advice to businessmen.