Importance of Property Insurance in Pakistan


Property insurance is defined as that provide either property protection coverage or liability coverage for property owners. Insurance is the financial protection of property against damage or theft. In most insured properties, if a person is hurt on a property other than the owner or renter, appropriate care is financed by the insurer.  Property insurance provides financial protection against untimely catastrophes like floods, earthquakes, and man-made or natural fires.

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Understanding Property Insurance

Property insurance covers several events like theft, vandalism, flood damage, earthquake, maintenance damage, and sewer backup.  The insurers are also bound to cover damage to a property caused by theft and other crimes. A lack of property insurance can financially expose the owners and the renters of property to all sorts of risks. Property/real estate/home insurance companies are heavily mistrusted in Pakistan. As the insurance market evolves, several insurance companies are entering the real estate sector in Pakistan. To understand property insurance in full, one needs to know the financial protection provided by most insurance companies.

Replacement cost

Insurance companies provide replacement costs for any property that has been damaged. The cost is calculated based on other properties of comparable material and quality used for the same purpose. The replacement cost policy is applied only if the insurance limit allows to spend to repair or replace the damaged property.

Extended replacement costs

The extended replacement cost extends the property insurance coverage limit to help cover extra costs associated with rebuilding property outside of a person’s control and exceeds the insurance policy’s coverage limit.

Actual Cash Value

Insurance companies also use the actual cash value of the property to meet the costs of the damage done to the property. Judicial rulings support that actual cash value is the cost to replace with new property of similar kind and quality.

According to Clearsurance, everyone should compare different insurance policies before making their final decision.


Property Insurance in Pakistan

The insurance industry is primarily misunderstood by its customers. Without any surprise, Pakistan has in the South Asian region. According to the Association of Pakistan (IAP) report, the gross premiums are not worth more than 0.9% of the Gross Domestic Product (GDP). A regional comparison of Pakistan’s insurance industry shows how the country lags in this industry. In India, total insurance coverage stands at 3.76% of the GDP, Vietnam at 2.24% of the GDP, and globally the industry is responsible for 7.2% of the GDP. In Pakistan, State Life Insurance Corporation is one of the biggest property insurance providers, with more than 50 high-rise commercial properties and plots under its belt in different cities of Pakistan.


Benefits of Property insurance

In Pakistan, law enforcement is fragmented in other areas, which pose a great threat to the protection of physical property. While everyone wants to avoid the possibility of a break-in at their premises, burglaries frequently occur in different areas of a city. Research shows that property prices tend to decline automatically in areas where law enforcement is weak and criminal activity rampant—crimes like burglary, theft, and vandalism force property owners to seek insurance coverage.

The insurance of commercial property is sometimes more crucial than home insurance. In Pakistan, where a lack of planning and non-compliance of building by-laws affects most areas of real estate, commercial property insurance is highly needed. News of retail centres and shopping plazas catching fire in different metropolitan cities has encouraged most commercial property owners to ensure their individual property against such spontaneous disasters.

Large scale property insurance can help create transparency in the real estate sector. The insurance industry is undergoing significant changes in its size and the products offered. Previously, most property owners were reluctant to get insurance because of religious concerns. Several companies have offered Takaful window operations besides the conventional insurance services to gain widespread market acceptance to address this issue. As a result, property insurance is gaining a significant share in the overall market. As the real estate sector (residential and commercial) expands due to increasing investments, an increasing number of investors tend to protect their assets through insurance. This overall acceptance of property insurance is also a result of increasing regulations in the real estate sector. Intense regulatory scrutiny and control will promote transparency and financial strength across the property sector. Besides increasing regulatory framework, technological developments are also creating room for increasing transparency in the industry.


A lack of property insurance in Pakistan’s real estate sector has been a cause of distress for many residential and commercial real estate owners. The insurance sector has evolved in Pakistan and is accommodating the growth in the real estate sector. Property insurance acts as a buffer against all kinds of natural disasters like floods, heavy rains, earthquakes, and other hazards, as well as man-made catastrophes like electrical fires, theft, or vandalism. It is advised that real estate owners get their property insured to protect themselves from severe financial harm or distress. Moreover, increasing property insurance can help increase regulation and transparency in the real estate sector.

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