Tuesday, 21 February 2023

Life Insurance vs General Insurance

Insurance is a financial tool that individuals and organisations use to protect themselves against potential financial damage. It provides a safety net in the event of unexpected events such as loss of life, accidents, damage from natural disasters, theft, and illnesses. There are many types of insurance designed to protect against varying types of risks.

Read on to know more about the difference between life and general insurance and understand which type of insurance may be the most appropriate for your needs.

Life insurance

Life insurance is a financial protection tool that provides guaranteed compensation to an individual's family in the unfortunate event of their death. It can be used for covering expenses such as funeral costs, outstanding debts, future goals and lifestyle expenses. There are several types of life insurance products, such as:

Term life insurance plans
Unit-linked life insurance plans
Endowment life insurance plans
Annuity plans
Money-back plans
Group life insurance plans
And others

General insurance

General insurance is a type of insurance that protects individuals and businesses against financial loss resulting from illnesses, accidents, loss or damage, and other unexpected events. This type of insurance typically covers losses to an individual's or organisation's property, such as homes, cars, jewellery, and other physical assets. Further, general insurance includes health insurance too. It also provides protection against liability which may arise if any damages have been caused to others by covering the insured's legal responsibility. Some examples of general insurance are:

Car insurance
Health insurance
Business insurance
Home insurance
Travel insurance
Liability insurance,
And others

Differences between life and general insurance

Let us help you differentiate between these two types of insurances:

Points of difference	Life insurance	General insurance
Scope of coverage	Life insurance provides financial protection against loss of life. These plans offer financial compensation in the unfortunate event of the insured’s demise during the policy term.	General insurance offers financial protection in the case of damage, loss, liability, injury, illness, or theft. It includes the protection of assets other than life.
Sum assured	The sum assured of life insurance plans can be decided on the basis of the insured’s income, debts, lifestyle, and the needs of the loved ones.	The sum assured of general insurance plans is decided according to the asset’s value. For instance, in the case of car insurance, the insurer will consider the age, model, market value and condition of the car.
Policy term	Life insurance plans generally have longer policy terms as they protect the insured for life. Some life insurance plans may also provide lifelong protection.	General insurance plans have relatively shorter policy terms. In most cases, policyholders need to renew the insurance plan after a few years.
Premium payment	The premium for life insurance plans can differ based on the type of life insurance. However, it can be paid monthly, quarterly, semi-annually, annually, or in a single payment at the time of purchase.	The premium for general insurance plans also depends on the type of insurance. However, in most cases, the premium is paid at once at the time of purchase. Having said that, some general insurance plans do offer monthly, quarterly, semi-annual, and annual payment options.
Premium amount	The amount for the premium of a life insurance policy is decided on the basis of the insured’s age, health history, policy duration, sum assured etc.	The premium of a general insurance plan is decided based on the market value, age, condition, policy duration, etc., of the asset. In the case of health insurance plans, insurers consider the insured’s health history, age, occupation, sum assured etc.
Benefits	Life insurance plans may offer dual benefits. Endowment, money-back plans can be helpful in building savings for varied life goals while protecting the family financially. Similarly, unit-linked insurance plans offer investment opportunity and insurance cover in a single plan.	General insurance plans only offer one benefit – financial protection against unfavourable events.
Claim process	Life insurance plans offer financial protection against loss of life. Therefore, the claimant needs to submit a death certificate to claim the sum assured. Additionally, insurers may also require a copy of the FIR or police record in the case of accidental death. This is in addition to the mandatory documents needed by the insurer.	General insurance claims may require a copy of the FIR in the case of theft, loss, or damage. Further, health insurance claims require hospital records or bills. In the case of travel insurance, airport or airline records/ receipts for loss, damage, or flight delays, or photographs of the damaged goods may be required.

How to choose the right type of insurance?

Life and general insurance plans serve entirely different purposes and are both equally important. While everyone must buy life insurance, your need for general insurance can depend on your assets. Even then, some general insurance plans like health insurance are critical for everyone.

It is advisable to assess your needs and pick suitable insurance plans accordingly.

Conclusion

The purpose of an insurance is to protect you and your family. However, before choosing one, it is imperative to understand the purpose of investing in one. Insurances should be chosen based on the end goal. It is also essential to have the right coverage in place to ensure financial security in the face of unforeseen events. Additionally, it is also crucial to pick a suitable insurance provider to enjoy complete financial protection and eliminate hassles or delays in your hour of need.

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Mktg/Blog_LIvsGI/V1/Jan2023