Aids To Trade That Support Commerce: Insurance: Purposes Of Insurance (Copy)
Cheat Sheet: 5.3.1 Purposes of Insurance
Purposes of Insurance
| Purpose | Explanation | Example |
|---|---|---|
| Risk Reduction | Spreads risk among many policyholders through pooling | Car insurance reduces risk of total loss for driver |
| Compensation | Provides payment for actual loss/damage suffered | House insurance pays after fire damage |
| Financial Protection | Protects individuals/firms from unexpected financial burden | Health insurance covering surgery costs |
| Business Confidence | Firms can take risks knowing losses will be covered | Exporter insured against goods lost at sea |
| Investment | Premiums collected by insurers are invested in economy | Insurance companies invest in real estate, bonds |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course
Quick Comparison
| Key Idea | Without Insurance | With Insurance |
|---|---|---|
| Risk | Entirely on individual | Spread across many |
| Compensation | Victim bears loss | Loss covered by insurer |
| Financial Protection | Savings drained | Costs covered |
| Confidence | Reluctant to expand | More willing to grow |
| Investment | No extra funds raised | Premiums fuel economy |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course
Summary
| Takeaway |
|---|
| Insurance provides security and stability by covering risks, compensating losses, protecting finances, boosting business confidence, and channeling funds into investments. |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course