02/12/2022
When you buy insurance you are buying a promise - insurance is a promise. It is a promise that when something catastrophic happens to you, somebody, or in this case, the underwriter, your broker, your insurance partner, or whoever you are doing business with is standing up for you to protect you in the event of a disaster and subsequently, to help you to get back on your feet when the need arises.
Insurance may seem to only be forth looking and forthcoming, but there are other reasons insurance should be part of your wealth fund planning;
1. For some policies, most importantly, it is compulsory. For example, here in Kenya, there are some business classes that require insurance by law e.g. the motor sector. It is the law that when you have a car or a bike on the road you need to have insurance. It is a requirement, not only for mitigation of risk, but also to ensure drivers are equipped with tools to stand up for emergencies as they play a sensitive role to protect the lives of others and themselves on the road.
2. It grants peace of mind and it is the right thing to do- In a world where humans are exposed to great risks of catastrophe and disaster, insurance provides a sense of security to individuals which helps to ensure peace of mind. Insurance allows individuals to transfer risks and provides a safety net for new opportunities as individuals become braver in exploring new ideas and vast decisions.
3. It is a financial tool – Insurance enables you to receive financial assistance after a disaster or an accident. It is a financial tool because it enables you to recover faster. Insurance covers emergencies that could potentially occur, for instance, when you use insurance as a financial tool in auto insurance, it gives you the extra financial help to pay for the repairs or replacements of your otherwise damaged car. Insurance also helps you to keep track as much as possible after some bad duels
4. It ensures family stability- Insurance is a safety net when things go wrong on the family part. For instance, in the event of a medical emergency, the burden of paying the bills either for yourself or for your family is a major hindrance to recovery. So when we speak about family stability, insurance can really help to keep focus on recovery.
5. It ensures business stability- Insurance keeps commerce going. For instance, when 9/11 happened, it was a big hit to humanity and it was also a big hit to business continuity and the big question at the time was whether terrorism is an act of war and the big question was how the 9/11 attacks would be classified.
At that stage, unfortunately, it was classified as an act of war. In the vast majority of cases, most insurance policies exclude, by default, damages caused by acts of war, as they are potentially too great to insure. However, at that stage, it was not being classified as an act of war but some insurers began afterward to exclude terrorism.
There’re obviously certain business cases that are needed to keep our day-to-day life going. Insurance can really ensure that business is continuing and business owners are brave enough to go into these kinds of businesses.
In the business community, in most cases, big businesses are able to survive catastrophes better than startups and small businesses because the big businesses have a lot of safety nets and they can take a hit. But small businesses will often struggle because they lack big pockets and a safety net to finance blow-ups. In these cases, small businesses will often go bankrupt or the big businesses will buy the small businesses and this creates monopolies. In this case, insurance really helps to prevent monopolies from forming.
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