Asia Insurance Knowledge Centre

Here is everything you need to know before opting for an insurance policy that best suits your needs

Do you want to learn about insurance? Have you purchased a policy yet that’s right for you? We’ve got your covered! Our knowledge centre is here to guide you through the whole process.

In the simplest terms, insurance is that one friend who always has your back when things get tough. Been in a car accident? Don’t worry, insurance will take care of it for you. Have a medical emergency? Insurance will pay the bills. It is always there to help!

Of course, insurance is a financial product and not an actual person. As such, there is a cost (a small one) associated with maintaining it by your side for when you might need it. This cost is a fraction of the amount you would otherwise spend in the time of an emergency. 

Insurance premiums, as they are called, are usually designed so that those seeking insurance can pay them without taking a huge chunk out of their earnings. They’re fractional and typically just a small percentage of the amount insured!

Insurance works by spreading potential risks over a large number of people or companies in a similar situation. Insurance companies facilitate the process and manage the books to make the mechanism as hassle-free as possible

Insurance in Pakistan is broadly defined under two categories. 

LIFE

Life insurance policies cover scenarios related to untimely deaths due to accident or natural causes. 

Life insurance companies can also provide health insurance policies.

Life insurance is different from general insurance because it can offer a savings component in addition to the insurance. 

For example, the life insurer can offer to invest a portion of the premium, and the policyholder can benefit from this when the policy matures 

The benefits paid to the insured’s family usually depend on the premium payments made to the insurance company over a period of time. 

Life insurance policies can be of many different types. They are generally defined into conventional, universal, and unit linked categories.   

Life insurance companies cannot offer General Insurance products and vice versa

 

GENERAL

 

General insurance policies cover the most common risks in life that include automobile-related issues, health problems, and property damage etc..

General insurance policies do not have a savings component. These policies need to be renewed annually

In Pakistan, general insurance has been broadly grouped into business-to-business and business-to-consumer policies. 

Businesses tend to seek protection for property and equipment against fire, theft, natural hazards, and other perils. They also seek protection against product liability, shipping problems, and machinery or worker related issues. 

Consumer products include motor insurance, health insurance, and travel insurance.

There is no lock-in period for general insurance products, and customers are free to not renew their policy after it expires, normally 1 year after the policy was issue.

  

There are offerings in both categories for Islamic cover, called Takaful

Takaful is the Islamic alternative to insurance. 

Takaful policies offer individuals and businesses the ability to pool their risks and protect themselves against losses of different kinds. The takaful operator acts as the manager of the fund created for this purpose. Takaful is different from general insurance because the holders of takaful partake in the benefits as well as the losses from a collective fund.

If the Takaful Participants’ Fund returns a profit for the year, this is distributed back to the participants of the pool. In Takaful, investments can only be made in Shariah-compliant businesses. For Takaful holders who purchase family insurance policies that have a savings option, a positive return on investment is not guaranteed.

In Pakistan, some general insurance companies and life insurance companies have obtained the license to operate Window Takaful Operations (similar to Islamic Banking windows at banks) Asia Insurance offers such products through Asia Window Takaful, with each policy wording vetted by a Government certified Mufti.

For more information click here.

GENERAL INSURANCE

General insurance offers the most comprehensive set of policies against protection from financial losses of all kinds, including third-party protection against motor accidents, cost coverage for unforseen surgical procedures, and travel-related problems.

We have broken down what all of these different types of insurance policies are, what they cover, and how they work, so that you can make an informed decision about your future. 

MOTOR

Motor insurance offers companies and individuals protection against auto accidents, theft, and minor damages. 

There are many different kinds of motor insurance policies, including for personal cars, fleets, taxis, ride-hailing services, public transport, and all kinds of other vehicles. 

Individuals who have personal motor insurance do not have to pay out of their pocket for any expenses related to the vehicle, like minor accidental damage, theft, or a write-off due to a major accident.

 

HEALTH

Health insurance policies offer protection against expenses incurred in case of illness or injury. 

ealth insurance companies reimburse an individual for hospital expenses or pay the care provider directly. 

Insurance policies also offer protection against personal accidents or disabilities. 

 

Personal Accident insurance also covers loss of income due to inability to work due to  permanent disability. 

Health insurance is available for individuals, families, and businesses.

 

 

TRAVEL

Travel insurance products mostly offer individuals protection against health emergencies while traveling abroad. 

It also protects individuals from other losses during travel, like lost luggage or last-minute ticket cancellations. 

It is very common for foreign embassies in Pakistan to ask that visa applicants purchase travel insurance before applying.

Travel insurance premiums vary according to the number of days chosen for the coverage and the travel destination e.g. coverage for the USA is more expensive than for Turkey. 

Travel insurance premiums are one-time payments. However, elaborate plans are also available for frequent travelers.

 

 

Got that insurance policy but not sure about those terms? Check out our most common insurance terms section

Have more questions about insurance or the policy you’ve purchased? Not sure how to file a claim? Our FAQs are here to help

ASIA INSURANCE GLOSSARY

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