What are the Benefits of Insurance to Economic Development? – 7 Benefits are listed and explained in this article.
How important is insurance to Nigeria economic development?
Insurance is an investment, that plays a vital role in covering risk as uncertainty is paid for losses, offers liquidity, and facilitates loans.
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In addition to this, there are other benefits of insurance to economic development which are highlighted and explained below;
1. Insurance provides tax benefits
Taxation has been a source of revenue to the government and tax benefits are an important benefits of insurance to individuals and companies.
These individuals and companies should pay heavy taxes to the government depending on their size of operation but based on the policy maturity value, insurance can offer a tax-free period to these individuals and companies.
This is mostly seen in most advanced countries like the USA, China, India, Japan, United Kingdom, Europe, Dubai, etc.
In addition to this, the benefits of insurance to economic development are seen in the aspect of offering tax exempted or tax release when filing an income tax return for a premium that is paid in every fiscal year.
2. Insurance meets contractual requirements of that nation’s regulations
Insurance is legit as it fulfills all legal requirements and meets contractual requirements of that country’s regulations (whether as a developed or underdeveloped nation).
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Every insurance company that contributes to the economic development of that nation must have lawful licenses and must convince the government and other financial regulatory bodies that it can operate given the speculated financial resources.
3. Flexibility of investment structure in the economy
Insurance does not have a rigid or unbending structure but it has a flexible investment structure in the economy to accumulate all businesses in the economy.
Aspect from the investment plan, the insurance creates a will to either terminate the contract or renew the agreement making the economy more flexible for businesses to operate freely and at will.
There is Flexibility generally in the investment plan, investment option, financial structure, premium payment terms, retirement period, time, goal, policy, policy durations, and diversification either into debt or equity decisions.
There is also Flexibility based on five basic choices namely:
i. type of risk to cover holder
ii. Insurance companies invest in financial markets
iii. Insurance-linked equity plans like ULIP (Unit Linked Insurance Plans)
iv. Investment in best sip mutual funds plan
v. Insurance plans linked
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4. Insurance Provides Employment Opportunities to both citizens and non-citizens
The provision of Employment Opportunities expands the capital base of that nation. The benefit of Employment Opportunities cannot be underestimated as it also limits the crime rate especially youths who are vulnerable to crimes due to unemployment certainly have a means of likelihood. Insurance companies employ both citizens and non-citizens as staff who may be subject to rain to understand the dynamics of the company.
5. Insurance covers all risks and losses
Imagine a company that is creating a huge return to the government and expanding the economic activity of that nation suddenly is affected by a fire breakout.
This will have an insignificant effect on economic development (with the view that the company contributes to the per-capital income).
The weight may be on the government but if the company was insured, the burden can be taken off through the medium of insurance.
Hence the benefits of insurance to economic development is the covering up and making payment for all losses that may be carried out by the government of that nation.
6. Improving the financial stability of the country
Insurance helps people to spend on the needed items. In other words, resources are channeled to the right sector to solve that specific problem. It helps to avoid unnecessary financial fluctuations in the economy thereby improving the financial stability of the country.
7. Source of Investment
Insurance serves as a source of investment in the economy for individuals, companies, and the nation. It helps the agents of the economy to aim and achieve a defined goal or a defined agenda.
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When the Insurance companies folds or collects premiums from these agents of the economy, makes adequate investment and in turn boosts the economy of that nation.
Conclusion
When every Insurance company invests in financial markets in any country, they simply portray the benefits of insurance to the economic development of that nation.
