Benefits Of Insurance
Overview
Insurance looks, at first glance, like a private arrangement between one worried person and one company. In truth its good spreads far wider than that. The same premium that buys a Lagos trader a good night's sleep also helps a bank lend, keeps a factory open after a fire, pays the salaries of thousands of agents, and quietly builds the roads and bonds the whole country uses. Benefit flows outward, from the individual, to business, to the nation.
In this lesson you will learn to sort those benefits into their three tiers and defend each one. You will see how insurance manufactures the confidence to trade and to borrow, how the premiums of millions are pooled into long-term investment funds, and how a healthy insurance market feeds employment and national development. These are the marks WAEC hands out almost every year to candidates who can go beyond a bare list.
Objectives
- Explain the benefits of insurance to the individual, the business and the nation
- Describe how insurance promotes business confidence, credit and continuity of trade
- Explain how insurance mobilises savings into long-term investment funds
- Evaluate the contribution of insurance to employment and to national economic development
Mind map
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Flashcards
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Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Benefits Of Insurance. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Which of the following is a benefit of insurance to the individual? A. Provision of employment for actuaries B. Generation of foreign exchange C. Peace of mind D. Investment of funds in government bonds Answer: C
- Insurance is said to provide a basis for credit because: A. Insurers lend money directly to traders B. A policy can be assigned to a bank as security for a loan C. Premiums are refunded when no loss occurs D. Insurers guarantee that businesses will make a profit Answer: B
- An insurer collects premium income of 6,000,000,000 naira and holds 30% as investable funds. How much is available for investment? A. 1,200,000,000 naira B. 1,800,000,000 naira C. 2,000,000,000 naira D. 3,000,000,000 naira Answer: B
- The mobilisation of savings by insurers refers to: A. Paying claims promptly to policyholders B. Charging an equitable premium for each risk C. Gathering many small premiums into a large investment pool D. Transferring risk from the insured to the insurer Answer: C
- Which of the following is mainly a benefit of insurance to the national economy? A. Savings through an endowment policy B. Provision of employment and capital for development C. Reduction of a family's anxiety after a death D. Continuity of a single trader's business Answer: B
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Revision Questions
Wondering what past questions for this topic looks like? Here are a number of questions about Benefits Of Insurance from previous years
Question 1 Report
(a) Outline three features of life assurance.
(b) State three benefits each of life assurance to the;
(i) individuals
(ii) government
Answer Details
(a) Three features of life assurance
- It is not a contract of indemnity; it pays a fixed, agreed sum on death or maturity because human life cannot be valued in money.
- The risk insured against (death) is certain to occur, only the time is uncertain, so the contract is bound to give rise to a claim eventually.
- Insurable interest need only exist at the inception of the policy, and the policy can acquire a surrender value and be used as security for a loan.
(b)(i) Three benefits of life assurance to individuals
- It provides financial security and support for the family or dependants of the assured on his death.
- It is a means of saving for retirement and other future needs.
- The policy can serve as collateral to obtain a loan and can meet obligations such as children's education.
(b)(ii) Three benefits of life assurance to government
- The premiums pooled by life offices provide long-term funds that government can borrow through bonds to finance development projects.
- It reduces the burden on government of caring for dependants and the aged, since families are financially protected.
- The industry generates employment and pays taxes, and mobilises domestic savings that aid national economic growth.
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