Elements of protection are to spread the misfortune caused by a specific hazard over various people, who are presented to it and who consent to safeguard themselves against the hazard.
- Insurance provides certainty
Insurance provides certainty of payment at the uncertainty of loss. The uncertainty of loss can be reduced by better planning and administration. But, the insurance relieves the person from such difficult task. Moreover, if the subject matters arc not adequate, the self-provision may prove costlier. There are different types of uncertainty in a risk. The risk will occur or not, when will occur, how much loss will be there? In other words, there is uncertainty of happening of time and amount of loss. Insurance removes all these uncertainties and the assured is given certainty of payment of loss. The insurer charges the premium for providing the said certainty.
- Insurance provides protection
The main function of the insurance is to provide protection against the probable chances of loss. The time and amount of loss are uncertain and at the happening of risk, the person will suffer the loss in absence of insurance. The insurance guarantees the payment of loss and thus protects the assured from sufferings. The insurance cannot check the happening of risk but can provide for losses at the happening of the risk.
The risk is uncertain, and therefore, the loss arising from the risk is also uncertain. When risk takes place, the loss is shared by all the persons who are exposed to the risk. The risk-sharing in ancient times was done only at lime of damage or death; but today, on the basis of probability of risk, (he share is obtained from each and every insured in the shape of premium without which protection is not guaranteed by the insurer.
- Secondary Functions of Insurance
Besides the above primary functions, the insurance works for the following functions
The insurance joins hands with those institutions which ate engaged in preventing the losses of the society because the reduction in loss causes lesser payment to the assured arid so more saving is possible which will assist in reducing the premium. Lesser premium invites more business and more business cause lesser share to the assured.
- It Provides Capital
The insurance provides capital to the society. The accumulated funds are invested in the productive channel. The dearth of the capital of the society is minimized to a greater extent with the help of investment of insurance. The industry, the business, and the individual are benefited by the investment and loans of the insurers.
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- It Improves Efficiency
The insurance eliminates worries and miseries of losses at death and destruction of property. The carefree person can devote his body and soul together for better achievement, it improves not only his efficiency but the efficiencies of the masses are also advanced.
- It helps Economic Progress
The insurance by protecting the society from huge losses of damage, destruction, and death, provides an initiative to work hard for the betterment of the masses.