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    The Functions of Insurance Can Be Divided Into Three Categories

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    Dev Bahadur Budha
    The document outlines the primary, secondary, and indirect functions of insurance. The three primary functions are to provide protection against risk of loss, provide certainty of payment even during uncertain times of loss, and distribute risk among several insured persons. Secondary functions include helping economic progress by developing a sense of security for industrialists and businesses, and preventing losses by encouraging risk reduction. Indirect functions comprise forced savings through life insurance premiums, promotion of foreign trade by making insurance compulsory, and creating public confidence.

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    The Functions of Insurance Can Be Divided Into Three Categories

    Uploaded by

    Dev Bahadur Budha
    76 views13 pages
    The document outlines the primary, secondary, and indirect functions of insurance. The three primary functions are to provide protection against risk of loss, provide certainty of payment even during uncertain times of loss, and distribute risk among several insured persons. Secondary functions include helping economic progress by developing a sense of security for industrialists and businesses, and preventing losses by encouraging risk reduction. Indirect functions comprise forced savings through life insurance premiums, promotion of foreign trade by making insurance compulsory, and creating public confidence.

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    The document outlines the primary, secondary, and indirect functions of insurance. The three primary functions are to provide protection against risk of loss, provide certainty of payment even during uncertain times of loss, and distribute risk among several insured persons. Secondary functions include helping economic progress by developing a sense of security for industrialists and businesses, and preventing losses by encouraging risk reduction. Indirect functions comprise forced savings through life insurance premiums, promotion of foreign trade by making insurance compulsory, and creating public confidence.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    76 views13 pages

    The Functions of Insurance Can Be Divided Into Three Categories

    Uploaded by

    Dev Bahadur Budha
    The document outlines the primary, secondary, and indirect functions of insurance. The three primary functions are to provide protection against risk of loss, provide certainty of payment even during uncertain times of loss, and distribute risk among several insured persons. Secondary functions include helping economic progress by developing a sense of security for industrialists and businesses, and preventing losses by encouraging risk reduction. Indirect functions comprise forced savings through life insurance premiums, promotion of foreign trade by making insurance compulsory, and creating public confidence.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    The functions of

    insurance can be
    divided into
    three categories: 
        
    i. Primary functions 
      
    ii. Secondary functions 
      
    iii. Indirect function 
    Primary Functions
    • To provide protection 
    • The most important function of the insurance is
    to provide protection against the probable risk of
    loss. 
    • It is a kind of guarantee that insurance will make
    good the loss suffered by an individual. 
    •   Insurance cannot check the happening of the
    events but it certainty provides indemnity in such
    events
    2. To provide certainty 

    FUTURE IS UNCERTAIN, ANY AMOUNT OF LOSS IS ALSO UNCERTAIN


    MISFORTUNE CAN HAPPEN AT IN SUCH MISFORTUNES
    ANYTIME. 
    • It is true that better planning and administration can reduce uncertainty of loss. But
    it requires special attention, knowledge and determination. Insurance relieves man
    from such difficult task and provide certainty of payment at the uncertainty of such
    losses. Of course, premium is charged for providing such certainty. 
    3. Distribution
    of risk 
    • This is another important
    function of the insurance. 
      
    • The distribution of risk among
    several insured person is a
    method to spread over the
    losses. 
    • Secondary functions 
    • Insurance plays an important role in the
    development of industries and commerce
    and thus helps in the economic development
    of a country. 
    • It develops a sense of security among the
    1. Helps in the industrialist. They know that in case of
    happening of an unfortunate event their
    Economic losses will be compensated.  

    Progress 
    • his provides initiative to work hard which is essential for the economic progress of
    the country. Insurance helps in establishment of big industrial units also by
    providing protection against different types of business risks. 
     
    2. Prevent Losses 
    • Insurance plays an important role in the reduction of losses.
    • It encourages to reduce loss in many ways. 
    • Insurers gives incentives for reducing loss by lowering premium. 
    • For example, in fire insurance, discounts are allowed for improvement in risk. 
    •   Fire extinguishing appliances and on the other hand extra rates are charged for inferior
    constructions
      Indirect
    functions 
    1. Forced
    Savings
    • Life insurance is a method of saving. 
    • The premium paid is accumulated and
    returned to the assured if he survives at
    the date of maturity. 
    • There are certain relief in income-tax,
    allowed by the Income-Tax Act, to
    encourage the habit of thrift and savings
    among the people. 
    • Payment of life insurance premiums
    becomes habit and in effect brings   
    • about compulsory savings. 
    Foreign trade depends entirely on
    insurance.

    The bankers will not discount the marine


    2.Promotes trade bills unless the cargo is fully insured.

    Foreign In our country insurance has been made


    Trade  compulsory for foreign trade.

    It relieves entrepreneurs from the


    uncertainties of foreign trade
    • Insurance create confidence in public, provides
    3. Others source of investment and thus helps trade and
    Commerce to develop at a faster rate. 

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