Life Insurance in Bangladesh

Topics: Insurance, Life insurance, Actuarial science Pages: 13 (3638 words) Published: February 10, 2013
Insurance is a contract in which one party known as the insured also known as assured, insures with another party (person or organization), known as the insurer, assures or underwrites his property or life, or the life of another person in whom he has a pecuniary interest, or property in which he is interested, or against some risk or liability, by paying a sum of money as the premium. Under the contract, the insurer agrees to indemnify the insured against a loss which may accrue to the other on the happening of some event. According to Investopedia, Insurance is—

“A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.” At present, insurance is being used widely and becoming more and more popular both in personal life and in the business sector as a significant risk management tool which is primarily used to hedge against the risk of a contingent, uncertain loss. Insurance contract provides financial protection to the insured by the insurer against a loss arising out of happening of an uncertain event. The insured can avail this protection by paying premium to any insurance company with whom the contract has been made. Insurance works on the basic principle and concept of risk-sharing. When a company insures an individual entity (the insured), there legal requirements to share the risks associated with the insured by the insurer, breaking of which contract creates legal bindings. A great advantage of insurance is that it spreads the risk of a few people over a large group of people exposed to risk of similar type and the re-insurance system makes the total risk at zero level in the long run. On the one hand, insurance can increase fraud; on the other it can help societies and individuals in preparing catastrophes and in mitigating the effects of catastrophes on households, business operations and societies.

Kinds of Insurance:
The insurance can be divided from two angles: first, from the business point of view and the second, from the risk point of views.

Fidelity Insurance
Liability Insurance
Property Insurance
Personal Insurance
Risk Point of View
Liability Insurance
Property Insurance (Marine, Fire, Miscellaneous)
Life Insurance
General Insurance
Social Insurance
Business Point of View

Fig: Classifications of Insurance in Business Point of View.

Fig: Classification of Insurance in Risk point of view.
Life Insurance
A life insurance policy is a contract with an insurance company. In exchange for premiums (payments), the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries in the event of the insured's death. Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It's important to note that death benefits from all types of life insurance are generally income tax-free. Literature Review

According to Investopedia, Life Insurance is—
A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.

According to Wikipedia, Life Insurance is ….

Life insurance is a contract between an insured (insurance policy holder) and an insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits.

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