Life insurance companies contribute to economic development by holding a part of their assets in
Answer Details
Life insurance companies contribute to economic development by holding a part of their assets in long-term financial instruments, such as stocks and bonds. By investing in these instruments, life insurance companies provide a source of capital for companies and governments to fund their operations and investments, which in turn stimulates economic growth. This is because these investments generate income for the life insurance companies, which can then be used to pay out claims and invest in new policies, ultimately contributing to the overall stability of the financial system. By contrast, holding too much cash or near money can limit the potential returns for the life insurance company, while investing in equipment may not be as liquid or diversified. Money-market instruments can provide short-term liquidity, but they may not generate the same long-term returns as other financial instruments.