Insurance can protect you from financial loss if something unexpected happens. Accidents and disasters can and do happen, and if you are not adequately insured, they can leave you in financial ruin. When you buy insurance, you transfer the cost of a potential loss to the insurance company in exchange for a fee known as the premium. Insurance companies invest the funds safely, so they can grow, and can be used to pay claims as they arise. The decision to get insurance will depend on your circumstances and your stage in life. Examples of insurance protection include:
Car insurance: This will pay the cost of repairs to your vehicle if you have an accident or pay the insured value if your vehicle is stolen. It will also protect against loss to third parties.
Life Insurance: This will pay your family upon your death.
Property insurance: This will pay the cost of repairing your property in the event of fire or damage from causes as stated in the policy terms. Insurance can be obtained for both residential and commercial property.
Types of insurance
Insurance can be broadly classified into conventional insurance and Takaful, also called Islamic insurance. Takaful is the Islamic alternative to conventional insurance and is designed to comply with Shariah. Both conventional and Takaful offer the same insurance types and products. Some of the most common types of insurance policies offered include:
Car insurance
There are two basic types of car/car insurance coverage
Third party liability: Third party cover protects the policyholder against liabilities incurred to third parties in the event of an accident such as property damage, bodily injury or death. In Pakistan, purchasing third party insurance is mandatory for all vehicle owners.
Comprehensive: This is the broadest form of coverage. You are protected against financial losses from an accidental loss of vehicle, theft and third party liability claims as a result of an accident.
Premium rates depend on several factors which may include:
Make and model year of car
Purpose of vehicle use, private vs. commercial
Tracker installed and geographic location where car will be used
You can reduce your premiums by agreeing to take on more risk by increasing the deductible. This means ensuring the increase in the deductible amount yourself.
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