Explain Six Ways in Which Insurance Companies May Contribute To the Economic Development of a Country
The insurance industry often gets a bad rap. There are very few things that consumers hate more than setting up an appointment with their insurance agent. Many people would rather enjoy a nice root canal with their local dentist than sit down with their insurance agent over lunch to discuss their coverage or lack thereof. While many people do not enjoy discussing insurance, insurance does benefit our economy.
Five Ways Insurance Benefits Our Economy
Insurance Makes Businesses Safer – Having to purchase insurance makes a business aware of the risks that it takes in its everyday operations. Therefore, it is more likely to have strong worker safety program and is motivated to prevent losses which would cost it more money in insurance premiums. This side benefit of insurance protects workers from businesses who try to squeeze more profit out of employees or tolerate unsafe actions in order to increase revenues.
Insurance Stimulates The Economy – More than $300 billion are distributed through policy benefits and claims each year by the insurance industry. That money has a trickle down effect that can be felt in all corners of our economy. Insurance companies are also big investors in companies, stocks, and bonds which help facilitate our financial markets. In fact, insurance companies as a whole have over $1 trillion invested in the United States economy alone.
Insurance Eases Businesses Transactions – Insurance helps businesses operate smoothly with their everyday transactions. Without insurance, business would face significant liability when conducting what we consider the simplest business functions such as signing contracts, financing operations, manufacturing products, or even when hiring new employees.
Insurance Provides Recovery – Insurance policies allow businesses to replace their buildings and inventories in the event of a major catastrophe such as an earthquake or hurricane. It also allows homeowners to rebuild as well from the sudden loss because of a major event.
Insurance Protects Our Purchases – This is the typical benefit that most people associate with insurance coverage. Without homeowners’ insurance or auto insurance, very few people would be able to finance a new car or home loan. Almost all lenders require a borrower to have some form of insurance in order to protect the bank’s liability should that asset be destroyed or damaged when the owner does not have 100% equity in the asset.
When most people get online insurance quotes, they usually only think about protecting their homes, cars, or lives with insurance coverage. Often, we forget about the other parts of our economy and everyday lives that are facilitated because we have insurance. While many consumers think of insurance as an unpopular topic, it is a very necessary evil in our economy that is used to keep it moving nevertheless.
This is a guest post from Hank Coleman who is a personal finance writer that contributes to several personal finance blogs and websites.
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