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Insurance enables individuals, businesses and organizations to safeguard themselves from risks such as natural disasters, accidents or unfavorable events. Insurance is a legal contract that promises a future pre-agreed financial compensation to the insured party in an event that causes them financial losses. These are the key reasons why insurance is necessary.
The Importance of Insurance for Individuals
When an insurance policy is agreed upon, the insured party will purchase the insurance in advance by paying an initial amount – called a ‘premium’ – either as a one-time transaction or as multiple transactions paid over a period of time. The insurance contracts offered by an insurance company is called an insurance policy.
Risk is an unavoidable possibility in the life of an individual or during the operation of a business. Individuals risk developing a wide range of debilitating physical ailments. They may also become a victim of an accident. Similarly, businesses always face a number of risks, from weather-related disruptions to incidents such as theft.
Insurance enables individuals, businesses and organizations to manage risk factors by paying a small amount of money as an insurance premium. Buying insurance ensures that if a disruptive event occurs, the insuree will receive compensation for their loss and will be able to continue their normal life or business operations with minimal disruption.
The modern day business is exposed to a number of risks due to the increasingly complex and interconnected nature of the global financial system. A production or transportation disruption in one corner of the world can have a devastating ripple effect on thousands of businesses and livelihoods that are linked to them. The extraordinary nature and the unprecedented number of risks faced by modern businesses calls for safety measures. Business operations must be safeguarded from as many risks as possible in order to protect the investors and shareholders in the business from major financial losses.
“Insurance acts as an essential cushion against risks in the modern business world. It allows businesses to function even if some components of their operation – such as the raw material supply chain or the distribution system – suffer a disruption,” said a spokesperson for EventGuard Event Cancellation Insurance.
Insurance is equally important for individuals. It allows an individual to ensure that their loved ones get adequate monetary support in the event of their untimely death. There are plenty of reasons why insurance is important, but in the end, you only need one.