Economic Justification of Life Insurance

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Risk Management and Insurance Risk Management and Insurance (8546)(8546)

Topic:Topic:Economic Justification of Life InsuranceEconomic Justification of Life Insurance

Presented to:Presented to:

Sir Ahsan Khaliq Khan Sir Ahsan Khaliq Khan Presented by:Presented by:

Mudassar Afzal Mudassar Afzal Roll # Roll #

AR523807 AR523807

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ACKNOWLEDGEMENT

I am thankful to the ALLAH ALMIGHTY , the most Merciful and beneficent, by he assistance of Allah, I

have accomplished my task.

I would like to thanks all people who directly or indirectly helped me to achieve this target.

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InsuranceInsurance

An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

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Life InsuranceLife Insurance

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Life Insurance is a contract between an insured (insurance policy holder) and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") in exchange for a premium, upon the death of the insured person.Depending on the contract, other events such as terminal illness or critical illness can also trigger payment.

Life InsuranceLife Insurance

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Economic Justification of Life InsuranceEconomic Justification of Life Insurance

We must all die, but the time of death is uncertain. If the breadwinner dies prematurely, it will financially disturb the whole depended family members. Life insurance policy is a valued policy that pays a stated sum to a named beneficiary and is not a contract of indemnity. The insured event is the uncertainty of the time of death.

If the insured earns an income, and others are dependent on that earning capacity for at least part of their financial support, the purchase of life insurance is economically justified. When the breadwinner dies prematurely without standing financial obligations and dependents to support, it may result in financial insecurity for the surviving dependents. Life insurance can be sued to restore the family's share of the income of deceased breadwinner.

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DIFFERENT TYPES OF LIFE INSURANCEDIFFERENT TYPES OF LIFE INSURANCE

Whole life insurance

Term life insurance

Variable universal life insurance

Universal life insurance

Limited-pay

Endowments

Accidental death

Group life insurance

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Whole life insurance:Whole life insurance, or whole of life assurance (in the

Commonwealth of Nations), sometimes called "straight life" or "ordinary life," is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid, or to the maturity date. Premiums are fixed, based on the age of issue, and usually do not increase with age. The insured party normally pays premiums until death, except for limited pay policies which may be paid-up in 10 years, 20 years, or at age 65.

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Term life insurance: Term life insurance or term assurance is life insurance that

provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires, coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments or conditions. If the life insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time

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Variable universal life insurance Variable universal life insurance (often shortened to VUL) is

a type of life insurance that builds a cash value. In a VUL, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which of the available separate accounts to use is entirely up to the contract owner. The 'variable' component in the name refers to this ability to invest in separate accounts whose values vary—they vary because they are invested in stock and/or bond markets. The 'universal' component in the name refers to the flexibility the owner has in making premium payments.

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Universal life insurance Universal life insurance (often shortened to UL) is a type of

permanent life insurance, primarily in the United States of America. Under the terms of the policy, the excess of premium payments above the current cost of insurance is credited to the cash value of the policy. The cash value is credited each month with interest, and the policy is debited each month by a cost of insurance (COI) charge, as well as any other policy charges and fees which are drawn from the cash value, even if no premium payment is made that month. Interest credited to the account is determined by the insurer, but has a contractual minimum rate (often 2%). When an earnings rate is pegged to a financial index such as a stock, bond or other interest rate index, the policy is an "Indexed Universal Life" contract. These types of policies offer the advantage of guaranteed level premiums throughout the insured's lifetime at substantially lower premium cost than an equivalent whole life policy.

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CONCLUSION CONCLUSION

Life insurance policy is a valued policy that pays a stated sum to a

named beneficiary and is not a contract of indemnity. That is beneficial

for Insurance Policy holder family.

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Economic Justification of Life Insurance

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