Life insurance provides a death benefit to beneficiaries in the event of the policyholder's death. It is economically justified when the policyholder has dependents relying on their income. There are several types of life insurance policies, including whole life, term life, variable universal life, universal life, and group life, which differ in premium structures and cash value growth.

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Risk Management and InsuranceRisk Management and Insurance
(8546)(8546)
Topic:Topic:
Economic Justification of Life InsuranceEconomic Justification of Life Insurance
Presented to:Presented to:
Sir Ahsan Khaliq KhanSir Ahsan Khaliq Khan
Presented by:Presented by:
Mudassar AfzalMudassar Afzal
Roll #Roll #
AR523807AR523807

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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
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Endowments
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Accidental death

Group life insurance

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DIFFERENT TYPES OF LIFE INSURANCEDIFFERENT TYPES OF LIFE INSURANCE

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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DIFFERENT TYPES OF LIFE INSURANCEDIFFERENT TYPES OF LIFE INSURANCE

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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DIFFERENT TYPES OF LIFE INSURANCEDIFFERENT TYPES OF LIFE INSURANCE

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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DIFFERENT TYPES OF LIFE INSURANCEDIFFERENT TYPES OF LIFE INSURANCE

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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CONCLUSIONCONCLUSION

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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Questions