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Insurance is an important aid to trade. It is a contract between two parties whereby one party undertakes the risk of the other by receiving an amount is called premium. The following are the advantages of insurance;-

1. Protection ; Insurance provides protection against sudden and unexpected losses. It creates a sense of security in the life of an individual as well as the businessman.

2. Sharing of Risk ;Insurance shares the risk to which human life and property are subject. It distributes a certain risk over a group of persons who are exposed to it on a cooperative basis.

3. Increases confidence and efficiency among the businessmen; The security of life and property given by insurance brings peace of mind and confidence to the insured. This increases their efficiency.

4. It enables to obtain to loan from the banks or other firms; Insurance serves as a basis of credit. Credit on insured properties is easy to secure. Banks may even charge a lower rate of interest in such cases. The policy is an important document it also can be considered as a collateral security for getting loans and advances from the banks.

5. Promotes Savings and investment; Insurance promotes the habit of saving among the public. In the case of life insurance, the premiums paid by the insured will be accumulated and paid after the expiry of agreed period.

6. Provides the better atmosphere for the employees and employers ; Insurance helps to bring good working conditions in the business organizations. Any accident occurred to the workers during working time, increase the liability of employers. It can be managed by insurance.

7. Reduces the difficulties in foreign trade; Insurance reduces the uncertainties such as the chance of damage on products, loss on trading, bad debts, etc arising in international trade.

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