7 reasons why insurance is so important

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Assurance is complicated. It differs from purchasing a chair, a clothing, or food. A promise is what you purchase when you purchase insurance. It's a guarantee that, in the event that something terrible occurs to your company, your carrier will help you restore it to health. However, because insurance is an intangible good, it might be easy to question its worth at times.

Let's step back and consider the larger picture of why insurance is important. Here are seven reasons why insurance is so important. What else might you say?

1.) Insurance keeps commerce moving

There were considerable concerns regarding insurance coverage in the days following the 9/11 attacks. Acts of war are not covered by insurance. Was terrorism an act of war? The key concern was, how will the 9/11 assaults be classified? Fortunately, the insurance industry determined that the attacks were not an act of war.

However, following 9/11, several insurers began omitting terrorism. However, the federal government stepped in and mandated coverage in the sake of keeping trade going. In this situation, insurance most certainly prevented several enterprises, such as refineries and chemical transporters, from avoiding terrorist-targeted activities.

2.) Lenders Demand Insurance

This is related to reason number one: lenders demand insurance. Consider this: Before you buy or construct a new structure, mortgage lenders will require confirmation of insurance. In summary, if you need money to keep your firm running, you probably benefit from insurance. Without insurance, your winning business concept will be unable to obtain the necessary finance to take its initial steps, and your established company model would be unable to evolve and compete.

3.) Insurance is required in several states.

Insurance is necessary since it is sometimes required by law! Auto insurance is a prime illustration of this. In Wisconsin, auto insurance is required (home of HNI HQ). Auto insurance helps to reduce the chance of death on the road (which is all too common!). Workers' compensation is a type of mandatory insurance that is mandated in the majority of states.

4.) Insurance Provides Comfort

Intangible insurance gives another intangible: peace of mind. Commercial owners can engage in some business initiatives because insurance allows them to transfer the risk. This is the inverse of reason number two: lenders demand insurance. Insurance is the necessary (by lenders) safety net that allows entrepreneurs to pursue opportunities.

5.) Insurance Provides Financial Security for Families and Businesses

When risks go awry, insurance provides a safety net. If a family member dies, life insurance might provide financial help. It's the same for a business. If a critical employee or piece of equipment is unable to work, the company may continue operations owing to insurance. This ties in well with the importance of insurance in terms of peace of mind (No. 4). It all comes back to the premise that when insurance is triggered, policyholders are made whole again.

6.) Insurance Guards the Little Guys

When you look at your industry, you will notice both "big folks" and "little guys." The large players will be able to survive if a gamble goes wrong. They can withstand a blow. But the small guys can't take any punishment. As a result, they are risk conservative and, in certain situations, sell out to the big boys. If enough little businesses quit the industry (and one large corporation eats them up), you have a monopoly. However, with insurance, the small guys have backing if they choose to take a risk, which means they remain around for a longer period of time. In the end, insurance helps to avoid the formation of monopolies.

7.) Purchasing insurance is the responsible thing to do.

The West Fertilizer Co. explosion in Texas this spring is a sobering illustration of insurance in action. The neighborhood suffered $100 million in damage as a result of the explosion, which destroyed schools and hospitals. The fertilizer company's general liability coverage was merely $1 million.

The city is now suing West Fertilizer and will very certainly win all of the company's remaining property and assets that were not destroyed by the tragedy. This is because the fertilizer manufacturer lacked enough insurance. Furthermore, the city is suing the fertilizer plant's suppliers, saying they were aware they were delivering intrinsically unsafe products. In the instance of the West, Texas, plant explosion, insurance may have aided a town in its recovery.

Many company owners prefer not to bother about insurance. But whether people think about insurance or not, they may hope that it exists, allowing for risk transfer and offering a safety net for new prospects.