Importance of insurance in trade

1. How insurance facilitates
trade?
P R I N C I P L E S O F B U S I N E S S

2. Why insurance?
• Insurance helps to reduce the risks
associated with operating a business.
Many probable events can result in
financial loss for a business.
• Insurance policies provides
compensation in the form of a sum of
money or payment of medical or other
expenses.

3. How insurance promotes business activity and trade.
Commercial insurance protects business owners from specific
events which can cause financial problems. Without it, many would
be unwilling and unable to accept the financial risks, and fewer
business will exist.
In turn, far fewer goods and services would be produced, and costs
of production and prices would be much higher.

4. How insurance promotes
business activity and trade.
Insurance reduces the risk of operating a business because it
protects business owners from financial losses that will reduce
profits. Insurance safeguards against catastrophic events, such as
accidents, fires, lawsuits or major personal injury claims could halt
production and result in bankruptcy.
Sole traders and partners with unlimited liability,
so they can stand to lose even their personal
assets from these events.

5. How insurance promotes
business activity and
trade.
Insurance policies can also be used as a
motivational strategy or as part of the
payment package to attract employees,
such as group medical plans for
employees, where the employer
contributes part or the whole of the
premium on behalf of the employee.

6. How insurance promotes
business activity and
trade.
The principle of indemnity
applies here to as insurance
compensation seeks to put the
policyholder back in the same
position as before the loss.
Business operations will be
able to continue in most cases.

7. The End