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The Importance of Insurance in Financial Planning
The ability to plan is one of the critical skills of a human being and one that sets us apart from other species. It is also recognised that thinking ahead is not easy and that many of us find it difficult to plan and prepare for the long term.
We are often too caught up with the daily grind of life to think ahead. How many of us have knowledge of deadlines way in advance but get stressed because we wait until the last minute to deal with the issue? Planning ahead and acting on those ideas are keys to being ready when the future becomes the present.
The risk of losing someone or something that we hold dear is a constant factor in our daily lives. We often hear of some major disaster - fire, explosion, radioactive leaks, the havoc wreaked by hurricanes and earthquakes or multiple vehicle collisions on our own roadways. These are all events that can cause great loss to economies and can also create significant personal loss. However, the risk of loss and the accompanying grief and financial hardships can be mitigated by insurance.
The availability of insurance does not eliminate risk but it provides financial compensation to those who suffer loss. With insurance coverage in place, much uncertainty is removed from an enterprise or an individual and better planning can be engaged to ensure success or a better quality of life. The benefits to the community are obvious when insurance can assist economic growth and wealth creation.
We buy insurance to protect us financially and for peace of mind. The social and economic benefits include:
- Reduction in the impact of otherwise debilitating personal and business risks
- Provides security at home and in the workplace against accidents, crime, accidental loss and almost all natural disasters
- Access to medical care promotes good health
- Enhances economic prosperity by supporting entrepreneurial activity and making activities whether personal, corporate or national, more affordable.
In addition, the insurance industry as a whole and individual companies often engage in social/community activities that enhances the quality of life for citizens.
The benefits of insurance far outweigh the costs. For a fraction of the cost to replace property or to make good incurred liability, we are able to secure coverage, thereby transferring risk. This allows for greater predictability and enhanced planning in business and in the management of personal finances by providing the ability to quickly rebuild, provide social benefits and ultimately contributing positively to national development.
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