Nobody likes to pay their insurance premium. It often gets more expensive over time and the more stuff you have and as your family grows, the more you need it. The same goes for companies.
As they grow and depending on the type of business they are in, they generally need to get a myriad of insurance policies; often because state law mandates it.
But as much as those premium payments are a hassle, insurance actually benefits our economy, and if you ever suffer a serious incident, you'll be happy you have coverage. The benefits of insurance are many and here are five ways it plays a vital role in keeping our economy stable, be that at a local or national level.
It makes us safer: Businesses that purchase insurance know that if they are remiss in managing risks, honoring contracts and reducing the probability of accidents, their rates will increase. More claims results in higher insurance premiums. That motivates companies to take extra measures to prevent losses and claims from happening in the first place.
At the same time, insurance protects employees through workers' compensation coverage, which pays their medical bills and part of their salary if they suffer an on-the-job injury or illness. Insurance also protects the general public, as company actions that injure third parties are covered by liability policies.
Insurance keeps the economy humming: Think about it. Every time your insurance company pays your claim, that is money that you would have had to spend out of pocket, depleting your savings. And if you didn't have the funds, the damage to your property would never get fixed, for example.
When insurance companies pay claims, they are circulating money back into the economy. Contractors fixing your damaged property would be paid by your insurer, and they in turn spend part of those funds on salaries and materials.
Additionally, insurers are large investors. They pour money into stocks, bonds and other financial markets. It's estimated that insurance companies have more than $1 trillion invested in the U.S.
Insurance makes for smooth transactions: Insurance protects companies when they sign contracts and obtain financing. Title insurance plays an important role in virtually all real estate transactions, ensuring protection against defects in title that may exist in the public records at the time a property is purchased.
It helps keep the lights on: If a business suffers a devastating loss that could imperil its future viability, insurance steps in to pay for those losses. This allows a company to replace equipment that is damaged or rebuild a facility that was razed by fire.
The same goes for homeowners. If not for insurance, if a fire burns half of their home, most families would not have enough cash on hand to rebuild.
Insurance pays for repairs and in the case of business, it can pay for lost income during the time a firm can't be open. And it pays for lodging if a family is displaced after a fire and during repairs.
It protects our assets: You likely spent tens of thousands of dollars on your car and if you are like most Americans, you have financed the vehicle. You can't finance an auto without carrying insurance. That way if you crash, the lender ensures that it can be repaired and you can continue using the car … and making the payments.
When we buy a home, we also have to carry insurance, which ensures damage will be fixed and paid for.
The takeaway
As much as you may hate paying your premiums, if the time comes when you have to file a claim, you'll be thankful you made the right choice.
Finally, one of the biggest benefits of insurance is peace of mind. You don't have to stress about things going wrong and the hardship it would cause, if you have this age-old backstop.
Give us a call if you'd like to review your insurance needs.