There are numerous benefits in buying insurance policy. The policy performs multiple functions and comes with various benefits. We have hereunder discussed some of the most fundamental benefits of insurance. And some other benefits such as the additional ones. The basic benefit of insurance coverage includes:

  1. Provision of Protection
  2. Means of Risk Sharing
  3. Peace of Mind
  4. Valuation of Risk
  5. Means to Economic Growth
  6. Financial Stability
  7. Means to Capital Generation
  8. Legal Requirement
  9. Tax Benefits
  10. Eliminates Financial Dependency
  11. Maintains Standard of Living
  12. Promotes Saving Habit
  13. Grants and Loans


Provision of Protection

We are in the world where nobody anticipates incurring losses but these losses happen from time to time. The losses are of the nature that we do not have control over the unfortunate incidents. This is the reason why insurance coverage exists to provide protection when we encounter these unfortunate unforeseen incidents in the course of life. It worthy of note to state that Insurance coverage does not operate to reduce the impact of loss we encounter. But it serves to provide monetary reimbursement or indemnity in the happening of the insured risks. It not only protects the insured from financial woes but also helps in checking mental stress arising out of it. Hence when the worse happens, Insurance comes forth to cover losses insulating you against the shocks of losses.

Means of Risk Sharing benefits of insurance

Insurance business operates in the form of a savings or a cooperative scheme. What this means is that the insurance company insures a lot of people who pay premiums. And the premiums are pooled together by the insurer.  For the fact that all the policyholders cannot encounter the insured risks at once, a fraction of the pooled premiums is used to indemnify a policyholder who suffers losses. And also  for the fact, that the insurer will be unable to pay a claim from the premium of just a policyholder. Therefore, the insurance company pools in collective risks and premiums because it covers a large number of people who are exposed to the same class of risk.

The financial indemnity to the one who suffers the loss is out of these funds pooled from all the policyholders by the insurance company. Thus, all the policyholders share the risk of the one who has incurred the loss.

Peace of Mind  

Buying an insurance policy provides the policyholder with peace of mind. This level of peace of mind comes from the certainty mind that your future is guaranteed in the circumstances where the insured perils happen to you.

Valuation of Risk 

One of the things an Insurance policy does is the proper assessment of the nature of risks the intending policyholder is exposed to and as well as the probable causes of it. The valuation will also extend to the amount for the insurance coverage and the amount of premium payable with respect to the risk. The benefit of insurance in this respect is the safeguard against uncertain unforeseen events and the attendant damages.

Means to Economic Growth

As a result of the role of insurance companies in turning their premiums into productive investments, the opportunities provided by these investments are enormous. Insurance companies hold substantial stakes in the areas of estate management, banking, Tourism and the hospitality industry, reinsurance business and so on.

Similarly, Insurance Companies encourage savings, promote commerce and trade and as such, encourage financial stability and economic development.

Insurance Companies equally promote economic development through employment generation, spreading of risks, and generation of financial resources.

Financial Stability

Relevant insurance policies guarantee financial stability for a policyholder — monies that could have been expended by a policyholder due to loss is taken care of by the insurer

Insurance companies play significant roles in the stability of financial systems. This is as a result of their huge investments in the financial markets. Insurance companies broker links between the Policyholders and the banks. And as well ensure the financial stability of the homes through the insurance of their risks. Needless saying that the financial stability of the homes culminates to that of the larger economy.

Means to Capital Generation

The insurance companies generate funds from the various premiums from policyholders. These generated from the various premiums serve as a pool of funds for the insurance company who invest same. and realize huge amount of money from such investments thereby generating capital. The insurers invest the monies in stocks, mutual funds, and other productive investments channels. Thereby generates good incomes and profits for the business. And equally serves to guards against capital loss for the insurance company.

Legal Requirement

There are some classes of insurance policies that are made compulsory by the laws of the country. A good example is a class of insurance policy legally compulsory is the Third-Party Motor Insurance.

In the same vein, some government policies/regulations require the existence of insurance coverage to access or benefit from them.

Tax Benefits of Insurance

There are some certain government policies which provides tax relief that are only beneficial to people with insurance coverage.

Eliminates Financial Dependency as benefits of insurance

Life insurance policies help families to bounce back to life financially independent after the death of the breadwinner of the family. In this sense, Dependents don’t have to worry about living expenses. Most policy calculators recommend a multiple of your gross income equal to seven to 10 years that can cover major expenses like mortgages and college tuition without the surviving spouse or children having to take out loans.

Maintains Standard of Living

As a result of the level of protection afforded by insurance coverage, Insurance gives the policyholder a level of protection that ensures that his standard of living is sustained after encountering losses.

Encourages Saving Habits- benefits of insurance

This is also one of the benefits of Insurance policies as it helps to inculcate saving habits among individuals. This they do by keeping a portion of income to pay premiums that will act as a guard for unknown future perils. Similarly, many insurance policies come as insurance as well as savings or insurance and investment schemes. Thereby encouraging individuals to save and invest

Grants/Loan Benefits of Insurance

In some deserving circumstances, insurance policy can be used to apply for loan and it serves as a Security for such loans


In all, the benefit of having insurance is that it provides indemnity in the happening of the insured peril. And thereby prevents you from spending out of your pocket in perilous times. It provides you financial assistance for your losses and damage when they occur. It is therefore advised that we buy into insurance to enjoy the above benefits.


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