Life Insurance vs General Insurance

What are the key differences between a Life and a General Insurance?

Everyone wants you to get insurance for yourself, your belongings, and your family, but no one mentions the essential types of insurance that are available. Most individuals will most likely now understand the two major kinds of insurance term life insurance and general insurance. Just be sure you have one question in mind: What are the differences between the two and how can they benefit you and your family in your time of requirement? Choosing the proper insurance is vital to reap its rewards. Here is an introduction to insurance, so you know how to select what type.

Life Insurance

Life insurance is like a fishnet for your life, providing financial security to your beneficiary so that you can rest peacefully in your golden years. Life insurance can be used as a tool to grow your savings as well as as a form of security. Read below about this insurance type.

Types of Life Insurance

Term Life Insurance: In this plan, the policyholder is covered for a set lapse of time or a fixed duration. If one satisfies this term, the nominee or relatives of the policy holder can claim reimbursement from the insurance company. Due to the long life expectancy today, term policies offer a lifeline of five nines of coverage.

Whole Life Insurance: Term life insurance coverage has a specified due date and does not cover you past that date. Whole life insurance coverage doesn't insist on a specific expiration date and covers you for the lifetime of a coverage holder. A nominee can't claim insurance coverage during the lifetime of the policyholder.

Endowment Plan: Endowment plan is a type of life insurance policy that also serves as a financial instrument. The policyholder can, in the event of an endowment plan, claim the assured amount, if the policy holder passes away before the maturation date. The policy beneficiaries could also reap the benefits if they survive the term.

The plan is unique to itself because it is a combination of insurance and investment. Part of the cost of the plan is allocated to coverage, and the rest of the plan is used for investing money. On maturity, the nominee receives the amount guaranteed and also the premium that was earned on investments.

Unit Linked Insurance Plans: Made famous as Unit Insurance Policies, these plans offer premium funding along with life insurance premiums. With Unit Linked Insurance Plans, policy owners can enjoy the benefits of insurance and investments under a single plan. In Unit Linked Insurance Plans, the premium paid by the policy owner is split between two accounts. One part is likely to invest in markets, much like in the case of mutual funds, and the other is used to provide life insurance.

Critical Illness Plan: This plan can be used to cover the costs of core health conditions. Critical illness plans cover the expenses associated with hospitalisation and the diagnosis and treatment of the said ailment for the policy holder. The rest of the funds may be requested upon the maturation of the policy, in keeping with the terms.

Money-Back Plan: This plan functions just like a regular endowment strategy, but you don't have to wait to receive your returns until your policy matures. Money-back plans pay returns after periodic intervals throughout the policy term, such as after 5 years or 10 years from the purchase of the policy.

General Insurance

While life insurance covers the life of one person, general insurance provides coverage to other aspects and assets in the life of one person, such as health, car, travel, home, and more. This type of coverage protects assets against theft or damage due to fires, natural disasters, accidents, manmade errors, such as riots or terrorist attacks. While life insurance provides protection from the risk of death, general insurance protects an individual from the ill effects of other forms of physical risk, such as his home or car.

Types of General Insurance

Health Insurance: This is one of the most common types. By means of this insurance, health expenses are covered for a heart attack or cancer operation, for instance. People can choose between various insurance packages depending on the illness and damage planned. There are different types of health plans available today. You can discover an individual cover or go for a family cover for all the members of the family.

Home Insurance: Like health , one may also insure his home for a predetermined amount of money. Home insurance protects the home during natural disasters such as earthquakes, floods, riots, theft, and so on. If your house is damaged, you have the opportunity to file an insurance claim. After assessing the extent of the damage, the insurance provider will pay the claim.

Travel Insurance: Travel insurance is pertinent for a particular trip and an individual can obtain it before he / she goes on the trip. This type of insurance offers security against the loss of baggage, delay or cancellation of flights, injury, or hospitalization expenses whilst traveling. If a person gets hurt or loses her purse, she can claim travel insurance to recoup the cost.

Motor Insurance: Motor insurance secures vehicles and provides protection against property damage caused by accidents, theft, riots, acts of terrorism, or natural phenomenons, like floods, cyclones, etc. Motor Insurance has two types:

• Comprehensive Insurance: Comprehensive motor insurance includes the parties involved in an incident. It also supplies protection from theft and damage to the elements of civil calamities, such as natural disasters, riots, vandalism, and human-made causes.
• Third-Party Insurance: This only covers third parties in the event of an accident. This type of insurance usually has a lower premium than comprehensive coverage.

Now that you know the meaning and types of life and general insurance; let’s move on to some major differences between the two.

Key differences between General and Life Insurance

Term of contract

With life insurance plans, the premiums are typically paid for an extended period of time after which the policy ends. Some plans last up to a lifetime, which means that they may cover a suitable amount of time.

Premium payment

The premium for a life insurance policy is paid at regular intervals, such as monthly, quarterly, or annually. In contrast, the premium for a general insurance policy is paid all at once, either when the policy is bought or when it is renewed. This may differ in cases where you decide to buy a travel insurance policy, as the money you make is only for the service of covering trips.

Insurance Claim

In the case of a life insurance policy, the sum assured is paid to a designee during the term of the policy in the event of the policyholder's passing. In endowment and cash back plans, the insurance provider also pays back the interest earned on investments. It is important to remember in the case of a critical illness that the policyholder can claim life insurance benefits after diagnosis of the disease or condition covered within the insurance policy, if the appropriate rider is chosen at the purchasing of the plan.

The insurance claims of a health insurance policy are often based on specific events. For example, general health insurance can only be claimed after hospitalization in the event of a medical emergency, or in the event of an ailment diagnosis, depending on the policy. Similarly, travel insurance, house insurance, and auto insurance can be claimed only if there has been damage to a property in response to an unfortunate event like a robbery, collision, or other such incident.

Policy Value

The policy value for a life insurance policy is based on the choice of the policyholder. He might choose the sum exposed depending on the objectives of his family, the ability to pay premiums, and so forth. They're then reimbursed the amount assured on design and development or to their beneficiary in the event of an event. 

If the value is known for general insurance, it is influenced by the damage suffered and not the coverage sum guaranteed.