How Insurance Benefits the Economy and Makes Us Safer
Insurance awareness day is June 28th, which makes this a good time to recognize the importance of insurance to the economy.
No one likes to pay their insurance premium. It often gets more expensive over time and the more you acquire personally or as your business grows, the more insurance you need.
But as much as those premium payments are a necessary evil, insurance actually benefits our economy. If you ever suffer a serious incident, you'll be happy you have coverage. The benefits of insurance are many and here are five ways it plays a vital role in keeping our economy stable, be that at a local or national level.
How insurance makes us safer
Businesses know that if they are remiss in managing risks, honoring contracts and reducing the probability of accidents, there is a good possibility that their rates will increase. More claims results in higher insurance premiums. That motivates companies to take extra measures to prevent losses and claims from happening in the first place.
At the same time, insurance protects employees through workers' compensation coverage, which pays their medical bills and part of their salary if they suffer an on-the-job injury or illness. Insurance also protects the general public, as covered company actions that injure third parties are responded to by liability policies.
How does insurance benefit the economy?
Every time your insurance company pays your claim, that is money that you would have had to spend out of pocket. If you didn't have the funds, the damage to your car or your home might possibly never get fixed.
When insurance companies pay claims, they are circulating money back into the economy. Contractors fixing your damaged property would be paid by your insurer, and they in turn spend part of those funds on salaries, benefits, and materials.
Additionally, insurers are large investors, and typically invest funds not set aside for paying claims and operating expenses into the economy. They pour money into stocks, bonds and other financial markets.
How does insurance help with business transactions?
Insurance protects companies when they sign contracts and obtain financing. Title insurance plays an important role in virtually all real estate transactions, ensuring protection against defects in title that may exist in the public records at the time a property is purchased.
How does insurance help to keep the lights on?
If a business suffers a devastating loss that could imperil its future viability, having the right insurance in place will help to pay for those losses. This allows a company to replace equipment that is damaged or rebuild a facility that was razed by fire.
The same goes for homeowners. If not for insurance, if a fire burns half of their home, most families would not have enough cash on hand to rebuild. Insurance also pays for lodging if a family is displaced after a fire during repairs
How does insurance protect assets?
You likely spent tens of thousands of dollars on your car and if you are like most Americans, you have financed the vehicle. You can't finance the car without carrying insurance. That way if you crash, the lender ensures that it can be repaired and you can continue using the car … and making the payments.
When we buy a home, our mortgage company will also require that we have insurance, which ensures damage will be fixed and paid for.
As much as you may dislike paying your premiums, if the time comes when you have to file a claim, you'll be thankful you have the insurance in place.
Finally, one of the biggest benefits of insurance is peace of mind. You don't have to stress about things going wrong and the hardship it would cause, if you have this age-old backstop.