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The role of auto insurance

Auto insurance and the economy insurance play a very distinct role to the individuals, community and the nation. However ,unlike other financial sectors ,such as banking, insurance generally speaking has not received wide coverage.in some cases, the has had Avery negative attitude towards insurance .therefore, knowledge about insurance is of great importance ,as it holds one key to the growth of a nation.

The role of auto insurance to the community

Communities depend on the smooth running of businesses in their area as a source of livelihood. A major loss or damage, resulting in a closure of such businesses will have a big impact on the community, for when a business does not operate because of loss or damage, a number of consequences are bound to take place; such may include the following, the area runs the risk of being economically depressed, people have less money to spend because of loss of job and also children might fail to go to school for lack of school fees.

The role of auto insurance to the individual

The loss or damage will lead to loss of use and can cause financial hardship to the individual. The individual can transfer the risk involved in the ownership of his property to insurers .in case of loss or damage, insurers will indemnify the individual who will be put back to the same financial position as just before the loss or damage occurred .the restored position as just before the loss or damage occurred. The restored position gives the individual peace of mind, which enables one to concentrate on the other national buildings activities.

The role of auto insurance to the nation

It is a time gap between receipt of premium and payment of a claim. Therefore, the insurer has money to invest and make loans available for business people. This provides good mechanism of mobilizing the capital required for national development.in this connection; insurance stimulates business activities that already in existence. The reasons for this are:

  • Insurers invest in new buildings, which are constructed using insurance funds.
  • Insurers finance a loss immediately it occurs and releases funds for investment in productive ventures instead of holding them as reserves to cover future losses.

Classification of auto insurance needs

Insurance fulfils individual, communal and national needs. The needs, which we have already discussed above, can broadly be classified into the economic and the social.

  • Economic needs. When policyholders that there is financial backing in case of loss, they will venture into business.in this sense, insurance encourages people to invest more because of the peace of mind that they get.
  • Social needs. Jobs will not lost and goods and service will still be available after a loss because insurance provides protection against loss people therefore will continue to contribute to the national economy

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