Disadvantages Of Insurance In Pakistan

1161 Words5 Pages
Insurance in Pakistan Engineering Economics - Semester Project Submitted to: Mr. Muhammad Yousaf Submitted by: Ali Farooq [112050] Ramsha Khuram [ 111541 ] Amna Abdul Rehman [ 112472 ] Muhammad Ureb Hasan [112792] Table of Contents What is insurance? 2 Why do we need insurance? 3 Types of Insurance 7 Islamic Insurance (Takaful) 13 How insurance works 14 End users 14 Insurance Companies 15 Benefits and drawbacks 16 Benefits 16 Drawbacks 17 Insurance policy components 18 References 21 What is insurance? A contract whereby, for a stipulated consideration, one party undertakes to compensate the other for loss on a specified subject by specified perils. The party agreeing to make the compensation is usually called the “insurer”…show more content…
This implies that people would pay something in order to ensure that they would keep the amount of wealth they have if they would otherwise face the chance that they would lose all or a portion of their wealth. Similarly, if people were asked to put their wealth at risk, as they would be if they invested in an asset that might decline in value, they would demand a rate of return higher than the rate of return for a riskless asset. The concept of risk aversion might be reflected in the advice that "a bird in hand" is worth more than "two birds in the…show more content…
Business owners can take on certain business ventures because they can shift the risk — thanks to insurance. Insurance is the required (by lenders) safety net that lets entrepreneurs explore opportunity. Insurance Ensures Family and Business Stability Insurance is a safety net for when risks go wrong. Life insurance can support the life of a family, should a member be lost. It’s similar for a business. Should a key member or piece of equipment go out of commission, the business can carry on, thanks to insurance. This reason why insurance is important dovetails nicely with peace of mind. Insurance Protects the Small Guys When you look at your industry, you see the "big guys" and the "small guys." If a risk goes wrong, the big guys will be able to survive. They can take a hit. But the little guys can't take a hit. As a result, they are more risk averse, and in some cases, they sell out to the big guys. If enough little guys leave the industry (and one big guy swallows them up), you're left with a monopoly. With insurance, however, the little guys have support if they want to take a risk, which means they stick around longer. What it comes down to is that insurance helps prevent monopolies from

More about Disadvantages Of Insurance In Pakistan

Open Document