DIFFERENCE BETWEEN LIFE & NON LIFE INSURANCE

Our everyday existence involves a variety of uncertainties capable of causing monetary pain. While there are no magic pills, a robust financial cushion of a well-rounded insurance portfolio undoubtedly helps. Timely preparation for managing risks and emergencies is the answer, and that's where wise insurance planning covering both life and general insurance or non-life insurance policies plays a critical role.

What about life insurance? What is general insurance all about? What are the advantages of non-life insurance and the top features of general insurance?

Let's answer the above questions, list the differences between life insurance and non-life insurance, and understand how an insurance contract differs from a general contract.

 

What is Life Insurance?

The Insurance Regulatory & Development Authority of India [IRDAI], the Government of India's autonomous and statutory body, describes life insurance as a financial cover for a contingency linked with human life, like death, disability, accident, retirement etc. It takes care of death and disability risks due to accidental or natural causes.

On payment of regular premiums, policyholders' dependents or beneficiaries get financial protection, recurring or lump sum amounts, in case of their death. Anyone, including homemakers and children, who supports or contributes to a family, earns an income or whose future income potential is at risk can be considered for life insurance.

 

Features of Life Insurance

●       A long-term contract of 10-30 years or until the end of the policyholder's life.

●      Diverse policy types with multiple features and advantages.

●      Determines a monetary sum based on the future loss of income due to an insured person's demise or accident disability.

●      Offers a definite amount as a death benefit.

 

Life Insurance Benefits

●       It ensures financial support and stability for your immediate family.

●      Makes arrangements for their lifestyle requirements and other contingencies.

●      Finances children’s education and other basic needs.

●      Brings additional income when earnings are minimized due to serious illnesses or accidents.

●       Acts as a saving or investment plan and a continuous source of earnings after retirement.

●      Provides tax benefits.

 

Types of Life Insurance Policies

Whole Life Insurance

Lifelong coverage in whole life insurance guarantees death cover and builds cash value with a savings component.

Universal Life Insurance

Like whole life insurance, it provides lifetime coverage, flexible premiums plus death benefits and a cash value component that grows over time.

Term Insurance

Financial security for a fixed term, coverage for a specified number of years, and death benefits are provided only if the insured dies during the term.

Endowment Policy

A combination of life insurance and savings provides death and maturity benefits.

Unit-linked Insurance Plan (ULIP)

ULIP covers life insurance protection and investments with wealth growth opportunities.

Money-back Policy

A life covered with policy-term periodic payments, liquidity and a death benefit.

Retirement/Pension Plan

Life insurance and investment savings for post-retirement income.

 

What is General Insurance?

Often called non-life insurance, general insurance can be explained as any insurance that does not fall under the life insurance category. Wide-ranging policies bring financial protection for your assets against risks ranging from accidents, theft and fire to natural disasters.

On payment of regular premiums, policyholders get coverage for specific losses during the policy period. It comprises policies such as health insurance, motor insurance, travel insurance and home insurance.

 

Features of General Insurance

●      Short-term contracts usually with yearly renewals.

●      Multiple policies with various features and purposes.

●      Optional add-ons.

●      Compensates for losses due to unexpected incidents or events.

●      Does not provide any death benefits.

 

General Insurance Benefits

●      It ensures that individuals or businesses do not face considerable financial losses.

●      Offers customized coverage.

●      Brings peace of mind.

●      Provides tax benefits for certain policies.

 

Examples of General Insurance Policies

Motor Insurance

Mandatory in India, it lets you choose between third-party or comprehensive covers and offers protection against theft, accidents or natural disasters that may damage vehicles.

Health Insurance

Health insurance lets you pick out individual, family-floater, or critical-illness options, takes care of medical treatment costs, and covers hospitalizations, amongst other aspects.

Travel Insurance

Travel insurance addresses travel-related risks from flight delays, flight cancellations and lost luggage to medical emergencies.

Home Insurance

Home insurance includes financial protection for residential properties against risks, including theft, fire and natural disasters.

 

Differences Between Life and Non-life Insurance

Life insurance is viewed as a must-have investment, a permanent and more long-term arrangement that provides financial support to beneficiaries upon the policyholder's death. Depending on the insurer's premium policy, it may be purchased for any value.

General or non-life insurance, on the other hand, is regarded as a contract of indemnity and a short-duration offering that addresses financial damages only caused by specific events. Here, the payable amount is strictly limited to the actual loss.

Investment or a necessity, irrespective of your outlook towards life and non-life insurance products, you need an established platform to carefully analyses all the policy offerings, including the issuance of an insurance endorsement. QuickInsure is the gateway to help you out and take all the proper insurance calls.

FAQs:

1] Can I Have Both Life and General Insurance?

Yes, although life and general insurance plans bring different types of protection, you should have both for maximum coverage.

2] Is Health Insurance Life or Non-life Insurance?

Health and medical policies fall under the general or non-life insurance category.

3] How Does an Insurance Contract Differ from a General Contract?

General contracts are mere legal agreements between two or more consenting parties mentioning their duties, responsibilities, obligations and rights.

Insurance contracts are much more specialized and technical agreements between insurers and insured individuals. In exchange for a premium, these arrangements ensure the risk is transferred from the insured entity to the insurance company, which promises to compensate for pre-defined potential future losses.

4] How do Life and Non-life Insurance Premiums Differ?

Life insurance premiums are usually higher than non-life insurance, and they are often fixed, unlike general insurance, where premium payments vary depending on the coverage and claims made.

5] How do Life and Non-life Insurance Claims Differ?

Life insurance claims are paid either in case of death of the insured individual or at maturity. General or non-life insurance claim payments are only made on the occurrence of specified losses or damages.

Disclaimer: The information provided in this blog is for general informational purposes only and should not be considered professional advice. While we strive to keep the content accurate and up to date, insurance policies, terms, and conditions may vary based on the insurer and regulations. Readers are advised to carefully review the terms and conditions of any life or non-life insurance policy before making a purchase.