Pakistan’s economic culture is one of spending not saving. However, despite this the insurance sector has only grown in the last 10 to 15 years. While the statistics are old, in 2006, about 5.9% Pakistanis had life insurance, while the number increased to 7.8% in 2011. More recently, it is speculated that this number has jumped in the double digits. This only goes to show that the efficacy of life insurance in Pakistan is slowly but surely becoming a reality.
If you are one of those who are unaware of the benefits of purchasing a life insurance or someone who knows about them and is still sitting on the fence, this blog is for you. Here, you’ll find information on what life insurance is, its types, plans and their cost and most importantly, its benefits.
So, let’s begin.
What Is Life Insurance?
When a policyholder purchases life insurance, they essentially sign a contract with an insurance company under which in exchange for paying premium, the insurance company promises to pay a lump sum amount to the policyholder’s beneficiary or beneficiaries after their demise. The money can then be used for any purpose. So, buying life insurance in a nutshell is like buying a safe future for your family or beneficiaries.
Types
There are two main types of life insurance:
- Term Life Insurance – This type of life insurance provides protection for a specific period of time. For example, the policyholder pays a premium for 10 – 30 years and if they pass away during this period, a cash amount is paid to their beneficiary or beneficiaries, etc.
- Permanent Life Insurance – This type of life insurance policy never expires. So, unlike the term life insurance, the permanent life insurance does not expire after a specific time. The permanent life insurance is further divided into:
- Whole Life Insurance – Ensures coverage of the entire lifetime of the policyholder and in addition saves money for the beneficiary or beneficiaries.
- Universal Life Insurance – Is similar to the whole life insurance though it differs from it in terms of premium structures and savings earnings based on market performance.
Which Is Better – Term or Permanent Life Insurance?
While both have their pros and cons, one thing you should remember is that no matter which insurance type you purchase, you’d be better off with it as compared to having no coverage at all. However, there is one other takeaway and a very important one.
Permanent life insurance premiums will always be higher than the term life insurance premiums. But then the return is great too – your beneficiary or beneficiaries will get death benefits and savings amount. There is no savings in the term life insurance, just the death benefits.
If this information has confused you or you have questions regarding these two insurance types then feel free to call insurance services representatives in Pakistan.
Plans, Costs & Benefits
Your life insurance premium cost will differ from company to company and what type of life insurance you have chosen to purchase. Therefore, treat the following information for educational purposes only.
Bronze Plan – In this plan, your yearly premium could be around Rs.1,500. Here, death benefits could be covered up to Rs.30,000. In the case of accidental death, the coverage could be as much as Rs.500,000. In the case of accidental disability, coverage could be of Rs.500,000. If the policyholder gets injured in an accident and has to be hospitalized, expenses of up to Rs.100,000 could be covered.
Silver Plan – In this plan, your yearly premium could be around Rs.2,000. Here, death benefits could be covered up to Rs.40,000. In the case of accidental death, the coverage could be as much as Rs.750,000. In the case of accidental disability, coverage could be of Rs.750,000. If the policyholder gets injured in an accident and has to be hospitalized, expenses of up to Rs.150,000 could be covered.
Gold Plan – Here, your yearly premium could be around Rs.2,500. Death benefits could be covered up to Rs.40,000. In the case of accidental death, the coverage could be as much as Rs.1m. In the case of accidental disability, coverage could be of Rs.750,000. If the policyholder gets injured in an accident and has to be hospitalized, expenses of up to Rs.150,000 could be covered.
Platinum Plan – Your yearly premium could be as high as Rs.5,500, against which the policyholder could get the following coverages:
- Death Coverage – Up to Rs.550,000
- Accidental Death Coverage – Up to Rs.1.5m
- Accidental Disability Coverage – Up to Rs.1m
- Accidental Hospitalization Coverage – Up to Rs.200,000
Benefits of Life Insurance
To sum up, some of the many benefits of life insurance are:
- Financial protection for the deceased’s family
- Funds for the deceased’s kids’ education
- Funds to pay off debts
In Pakistan, sole breadwinners are a common phenomenon. Unfortunately, when that sole breadwinner unexpectedly passes away, the family is left stranded with nothing. To avoid this dire situation, it is only prudent that one thinks of his/her family’s financial situation. Buying life insurance is one way to protect and safeguard your family’s financial interests.
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