Insurance and Social Security

INSURANCE AS A SOCIAL SECURITY TOOL
The insurance principle comes to be more useful in modern affairs. It not only serves the ends
of individuals, or of special groups of individuals, but also tends to spread through and
renovate modern social order or social security. Following point explain in the role of
insurance in social security empowerment.
A. Social security to individuals
1. Insurance provides security and safety
The insurance provides safety and security against the loss on a particular event. Eg.
In case of life insurance, payment is made when death occurs or the term of Insurance is
expired. The loss to the family at a premature, death and payment in old age are adequately
provided by insurance. In other words, security against premature death and old-age
sufferings are provided by life insurance. Similarly, the property of Insured is secured against
loss on a fire in fire insurance.
2. Insurance offers peace of mind
The security wish is the prime motivating factor. This is the wish, which tends To
stimulate to work more. If this wish is unsatisfied, it will create a tension which May manifest
itself in the form of an unpleasant reaction causing reduction in “work. By means of
insurance, feeling of insecurity may be eliminated.
3. Insurance protects mortgaged property
At the death of the owner of the mortgaged property, the property is taken over by the
lender of money and the family is deprived of the use of the property. At The damage or
destruction of the property, he will lose his right to get the loan repaid. The insurance will
provide adequate amount to the dependents at the early death of the property-owner to pay-
off the unpaid loans. Similarly, the mortgagee gets adequate amount at the destruction of the
property.
4. Insurance eliminates dependency
What would happen at the death of the husband or father, the annihilation of family
needs no elaboration. Similarly, at destruction of property and goods, the Family would suffer
a lot. It brings reduced standards of living and the suffering may go to any extent of begging
from the relatives, neighbours, or friends. The economic Independence of the family is
reduced or, sometimes, lost totally. The insurance is here to assist them and provide adequate
amount at the Time of sufferings.
5. Life insurance encourages saving
The elements of protection and investment are present only in case of life Insurance.
In property insurance, only protection element exists. In most of the life Policies elements of
saving predominates. These policies combine the programs of Insurance and savings.
6. Life insurance fulfils the needs of a person
The needs of a person are divided into:
a. Family needs,
b. Old-age needs,
c. Re-adjustment needs,
d. Special needs, and
e. The clean-up needs
B. Social security to business
The insurance has been useful to the business society also. Some of the uses are
discussed below
1. Uncertainty of business and losses if reduced
In business, commerce and industry a huge number of properties are employed. With
a slight slackness or negligence, the property may be turned into ashes. The accident may be
fatal not only to the individual or property but to the third party also. New construction and
new establishment are possible only with the help of Insurance. In absence of it, uncertainty
will be to the maximum level and nobody would like to invest a huge amount in the business
or industry.
2. Business efficiency is increased with insurance
When the owner of a business is free from the impact of losses, he will certainly devote
much time to the business. The carefree owner can work better for the maximization of the
profit. The new as well as old businessmen are guaranteed payment of certain amount with
the insurance policies at the death of the person; at the damage, destruction, or
disappearance of the property or goods. The insurance, removing the uncertainty, enable the
businessmen to concentrate more in business.
3. Key man indemnification
Key man is that particular man whose capital, expertise, experience, energy, ability to
control, goodwill and dutifulness make him the most valuable asset in the business and
whose absence will reduce the income of the employer till the time such employee is not
substituted. The death or disability of such valuable lives will, in many instances, prove a
more serious loss than that by fire or any other hazard. The Potential loss to be suffered
and the compensation to the dependents of such employee require adequate provision,
which is met by purchasing adequate life-policies.
4. Enhancement of credit
The business can obtain loan by pledging the policy as collateral for the loan. The
insured persons are getting more loans due to certainty, of payment at their death. The
amount of loan that can be obtained with such pledging a policy will not exceed the cash
value of the policy. In case of death, this cash value can be utilized for settling the loan
along with the interest. If the borrower is unwilling to repay the loan and interest, the
lender can surrender the policy and get the amount of loan and interest thereon repaid.
5. Business continuation
In a business, particularly partnership business may get discontinued at the death

of any partner, although the surviving partners can restart the Business. But in both the
cases the business and the partners will suffer economically. The insurance policies
provide adequate funds at the time of death. Each partner may be insured for the amount
of his interest in the partnership and his dependents may get that amount at the death of
the Partner.

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INSURANCE AS A SOCIAL SECURITY TOOL

A. Social security to individuals

1. Insurance provides security and safety

2. Insurance offers peace of mind

3. Insurance protects mortgaged property

4. Insurance eliminates dependency

6. Life insurance fulfils the needs of a person

The needs of a person are divided into:

B. Social security to business

1. Uncertainty of business and losses if reduced

2. Business efficiency is increased with insurance

3. Key man indemnification

In a business, particularly partnership business may get discontinued at the death

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