This document provides information about life insurance. It begins with definitions of insurance and life insurance, then discusses the history and evolution of the life insurance industry. It also covers life insurance in Pakistan, the different types of life insurance policies, reasons to have life insurance, how insurance works, effects of insurance, and terms and conditions. Finally, it outlines the main differences between life insurance and Takaful, which is an Islamic form of insurance.

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Tahseeb Hassan
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Muhammad Ali
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Bilal Sarwar
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3. Life
Insurance

4. What is insurance?
History of insurance
What is life insurance
Evolution of life insurance industry
Life insurance in Pakistan
Types of life insurance
Why to have a life insurance
How insurance work
Effects of insurance
Claim of insurance
Terms and conditions
Difference of life insurance and takaful

5. What is Insurance?
Insurance began as a way of reducing the risk to traders.
History of insurance
 As early as 2000 BC in China and 1750 BC in Babylon. Life insurance
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dates to ancient Rome; "burial clubs" covered the cost of members' funeral
expenses and assisted survivors financially.
Modern life insurance originated in 17th century England.
The first insurance company in the United States was formed in 1732 but it
provided only fire insurance.
The sale of life insurance in the U.S. began in the late 1760s.

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What is life insurance?
Life insurance is an insurance policy that pays monetary benefits upon the
death of the insured person in the policy. Basically it is an agreement
between the insurance company and the insurer wherein the former pays
the later with the accepted amount of money as per the agreement in case
of death, accident or serious illness.

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EVOLUTION OF LIFE INSURANCE INDUSTRY
Life insurance started back in the 16th century when people were taking
out life insurance contracts, mainly on a one year basis, to cover funeral
expenses.
At the time there were no restrictions on who you could take out the
insurance contract on and, as a result, a number of people were using it as
gambling.
Towards the end of the 18th century, there were a number of people with
quite high income but no assets who saw the need for taking out cover to
protect their dependents.

8. LIFE INSURANCE IN PAKISTAN
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The insurance sector in Pakistan, until end of year 2000, was under the
regulatory purview of The Federal Ministry of Commerce, Government of
Pakistan.
Empirical results show that during That period, the private sector insurance
industry was fragmented and suffered operational Inefficiencies due to
lower Paid‐up Capital and Equity requirements, while the public sector
Insurance companies enjoyed their privileged status due to captive
business.
A new insurance law was introduced in 2000 when the Insurance Act, 1938
was repealed and replaced with the Insurance Ordinance, 2000. The new
law primarily aimed to ensure the Protection of insurance policyholders’
interest and to promote sound development of the Insurance industry.
As of October 20, 2010 forty nine (49) insurance and takaful companies
are transacting insurance business in Pakistan along with one government
owned reinsurance company PRCL

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Types of Life Insurance
Term Assurance
Cash Value Life Insurance
Whole Life Insurance
Universal Life Insurance
Variable Life Insurance
Why to have a Life Insurance?
Protection
Liquidity
Tax Relief
Money when you need it

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How insurance work?
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Everybody contributes Rs. 1200/- each as premium to the pool of funds
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Total value of the fund = Rs. 60,00,000 (i.e. 5000 persons x Rs. 1,200)
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Total value of the fund = Rs. 60,00,000 (i.e. 5000 persons x Rs. 1,200)
Insurance company pays Rs. 100,000/- out of the pool to each family of all 50
persons dying in a year.
EFFECT OF INSURANCE
Risk of 50 persons is spread over 5000 people, thus reducing the burden on
any one person.

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Policy claim
Life insurance claim can arise either:
On the maturity of the policy – Maturity Claim
 On death of the policy holder – Death Claim
 Survival up to specified period during the term – Survival
benefits
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Terms And Conditions
Guarantee
Payment of premium
Grace period
Paid up policies
Loans
Evidence of age
Suicide
Travel residence and occupation
Liquidated damages

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Main difference between Takaful and Insurance
Takaful Companies
Conventional Insurance Companies
Takaful is based on mutual cooperation.
Conventional insurance is based solely on
commercial factors.
Takaful is free from interest (Riba),
gambling, (Maysir), and uncertainty
(Gharar).
Conventional insurance includes elements of interest,
gambling, and uncertainty.
All or part of the contribution paid by the Participant
is a donation to the Takaful Fund, which helps other
Participants by providing protection against potential
risks.
The premium is paid to conventional insurance
companies and is owned by them in exchange for
bearing all expected risks
Takaful companies are subject to the governing law
as well as a Shari’a Supervisory Board.
Conventional companies are only subject to the
governing laws.
There is a full segregation between the Participants
Takaful Fund account and the shareholders' accounts
Premium paid by the Policyholder is considered as
income to the company, belonging to the
shareholders.
Any surplus in the Takaful Fund is shared among
Participants only, and the investment profits are
distributed among Participants and shareholders on
the basis of Mudaraba or Wakala models.
All surpluses and profits belong to the shareholders
only.

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Main difference between Takaful and Insurance
Takaful Companies
Conventional Insurance Companies
The Plan Owners’ and shareholders’ capital is
invested in investment funds that are Shari’a
compliant.
The capital of the premium is invested in funds and
investment channels that are not necessarily Shari’a
compliant.