Study: My Understanding of Resources
People contribute money for the purpose of mitigating future risks through a process known as insurance. People taking an insurance cover are normally faced with the same risks. They are people carrying out the same activities. The money collected is then used to compensate those who eventually incur the risk. There are insurance companies that provide different types of policies for individuals faced by certain risks. Insuring businesses is necessary because of the risks businesses are exposed to from time to time. Though risks are unforeseen they greatly affect businesses if they occur.
In the case that risks occur, having an insurance cover enables a business to get back to its original financial position. Large losses are incurred by businesses in case of fire and theft. This may cause uninsured businesses to close down completely. An insurance cover ensures that business owners get an amount equal to the property damaged. They will find it easy to restore the damages incurred as well as go back to their normal business. Business owners are thus assured of peace of mind when such risks occur. They are compensated for the losses and reinstated to their original position.
Establishment of trust between the business and other stakeholders is easy with an insurance cover. People will gladly invest in an insured business. Investors can thus inject capital into risky businesses. The insurance company refunds their capital in the case of risks that cause failure. When pitching for financing businesses should indicate that they are insured. This also gives them greater leverage against uninsured businesses.
Having an insurance cover assures a company of ease in operations. The business will be ready to invest in additional equipment to improve productivity. Owners of the business also get more profits. Since they will not have to worry about the future of their business, they focus on its development. Capital will not be left idle for contingency after a business acquires an insurance cover. Money derived from the business can thus be reinvested ensuring that te business becomes more profitable.
It is recommended that all businesses acquire an insurance cover. It is required by law in some countries that businesses be insured. Apart from offering workers security of employment, it ensures that investors do not lose the money they put into the business due to risks occurring. When taking up insurance, it is important for businesses to consider their needs and activities. In case the risk occurs, the business will easily claim for compensation from the insurance company. They will also know the amount to be paid by the insurance company if they incur loses.
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