Advantages

1. Financial protection: Insurance provides financial protection to an insured. It guarantees or gives protection against large and uncertain loss in return of nominal amount of premium. Insurance provides certainty of payment in case of loss. Thus, it gives a feeling of security against the possible risk of uncertain events.

2. Reduction in risk: Humans are exposed to various kinds of risk and uncertainty. It is impossible to eliminate risk and uncertainty. Insurance is cooperative effort of sharing risk. Thus the impact of risk can be reduced through the distribution of risks to the no. of particles who has made insurance.

3. Encourages saving: The insured has to pay a premium regularly. Thus it encourages the habit of saving specially in life insurance. It creates the habit of saving to the insured person.