Purpose of Insurance
Every human being has fear in his mind. The fear whether he will be able to meet the basic needs of the life i.e. Food, Clothing and Housing. He has fear not only for himself but also for his dependents. The source of income to meet his basic needs may be through service or business.
If he is able to meet his basic needs then he acquires the assets i.e. vehicles, property or jewellery etc. Then he gets additional fear of saving the assets from destruction. (The assets may be destroyed through accident, fire or earthquake etc. and the income may be cut off due to certainty i.e. old age and death or uncertainty i.e. accident, illness or disability.)
As you know, the old age and death is certain for every human being while the accident, illness, disability and destruction of assets may be by random. The number of accidents will take place but with whom is uncertain. Therefore, to overcome this problem, the Insurance plays a very important role.
The principal source of income of an individual comes from the compensation for work performed by him. If this source of income gets cut off then:
Family will make social and economic adjustments like:
If he is able to meet his basic needs then he acquires the assets i.e. vehicles, property or jewellery etc. Then he gets additional fear of saving the assets from destruction. (The assets may be destroyed through accident, fire or earthquake etc. and the income may be cut off due to certainty i.e. old age and death or uncertainty i.e. accident, illness or disability.)
As you know, the old age and death is certain for every human being while the accident, illness, disability and destruction of assets may be by random. The number of accidents will take place but with whom is uncertain. Therefore, to overcome this problem, the Insurance plays a very important role.
The principal source of income of an individual comes from the compensation for work performed by him. If this source of income gets cut off then:
Family will make social and economic adjustments like:
- Wife may take employment at the cost of home making responsibilities
- Children may have to go for work at the cost of education.
- Family members might have to accept charity from relatives, friends etc. at the cost of their independence and self-respect.
- Family standard of living might have to be reduced to a level below the essentials for health and happiness.
- ILLNESS (malnutrition, environment, chronic) – uncertain
- ACCIDENT – (uncertain)
- Disability – Permanent or Temporary (uncertain)
- OLD AGE – (certain)
- DEATH – (certain)