IMPORTANCE OF INSURANCE

1.   Every individual business faces risks. It could be the risk of loss and damage to property, vehicles and stock due to fire, burglary, flood, accident and even theft by its own employees. It could be the risk of being sued for claims by members of the public, its customers and even by its own employees due to damages and losses suffered by these people as a result of its negligence. It could also be the risk of financial loss due to bad business decisions or unanticipated changes in demand for the business' goods.

2. In return for a small premium, insurance underwriters are willing to offer a wide variety of insurance cover to the ordinary business to protect it against some of these eventualities. Should the insured risk occur, the business will be indemnified and protected.

3. It must be realized, however, that not all risks faced by the business is insurable. Some, such as loss due to bad business decisions and unanticipated changes in demand, are non-insurable.

4. The insurance premiums collected by the various insurance companies in the country forms a very important pool of liquid funds in the country. Apart from setting a certain proportion aside to meet the claims of those who do eventually suffer loss as a result of the insured risk occurring, the rest of the funds provide an important source of finance for the development of the national economy.