Difference between Life Insurance and General Insurance
In today’s time, everything has insurance. Ranging from materialistic things like cars, smartphones to human life, everything is insured. We buy insurance to safeguard our things and future. There are different types of insurances like motor insurance, home insurance, term life insurance, travel insurance, disability insurance, etc. There are many more kinds of insurances. Insurances help in becoming financially secure so that the person is able to face any obstacle related to heath, life, gadgets, etc.
Buying insurances is a part of financial planning. For instance, medical insurance is bought to be financially secure if one is suffering from any disease. The premium paid on the insurance is covered up by the hospital. Insurances have many benefits. Today, we will discuss about two significant kinds of insurance, i.e., life insurance and general insurance. So, let us discuss them in detail.
Life Insurance
Life insurance is defined as a contract that has been laid between the insurer and the policyholder. In this contract, the insurer pays a particular amount to his/ her beneficiary after his death. The contract has different clauses. For instance, in case of fatal illness, the amount can be paid to the beneficiary. The insurance company pays a specific amount, also called as the death benefit. This amount is paid in exchange for the premiums.
One of the benefits of life insurance is that it helps in replacing the income if the insurer dies. This helps the beneficiaries in covering up the expenses like covering up the loans, paying the mortgage, etc. It is interesting to note that if the term life insurance has been completed and the person is still living, then the money stays with the insurance company. Cash-value life insurance is one of the important life insurances that help in building the cash value of the person. This cash can be accessed at any point in time for any reason.
There are two types of life insurance, i.e., term life insurance and whole life insurance. There are other types of life insurance as well (guaranteed issue life insurance), but these two kinds are the most important kinds of insurance. Interestingly, one can have two life insurance policies at the same time. It is legal and possible to do this.
General Insurance
General insurance is defined as the non-life insurance policy wherein house insurance, automobile insurance, etc., are included. In layman’s terms, general insurance is defined as insurance wherein car insurance, landlord insurance, renters insurance, power sports insurance, etc., are included.
Now, why is general insurance necessary? Well, general insurance is used to safeguard things from natural calamities, accidents, medical emergencies, etc. general insurance is a kind of financial protection from all contingencies. Some of the characteristics of general insurance include:
- Sharing of risk
- Payment at the time of emergencies
- The amount of payment is readily given.
- Insurance is a cooperative device.
General insurance helps in providing certainty from the different risk factors. It provides capital and helps in the prevention of losses. General insurance also improves efficiency and contributes to the overall economic stability and progress. It is interesting to note that general insurance does not lend any kind of funds to insurers.
Now, there are certain differences between life insurance and general insurance. So, let us have a look at them.
| S.NO. | LIFE INSURANCE | GENERAL INSURANCE |
|---|---|---|
| 1. | Life insurance is defined as the contract that has been laid between the insurer and the insurance company. | On the other hand, general insurance is defined as the insurance in which health insurance, medical insurance, automobile insurance, etc., are included. |
| 2. | Life insurance provides certainty against health and medical contingencies. | General insurance provides certainty from different risk factors like accidents, natural calamities, etc. |
| 3. | There are two types of life insurance, i.e., whole life insurance and term life insurance. | Motor insurance, travel insurance, home insurance, etc., are different kinds of general insurance. |
| 4. | Life insurance is a kind of investment. | General insurance is an indemnity contract. |
| 5. | Life insurance is a long-term contract. | General insurance is a short-term contract. |
| 6. | The payment of the insurance is paid either on maturity or upon the death of an individual. | General insurance is paid upon the occurrence of the event. |
| 7. | The premium on life insurance is paid over the years. | The premium in general insurance is paid in lump sum amount. |
| 8. | Life insurance has a savings component. | General insurance does not have a savings component. |
So, these are some of the contrasting points regarding life insurance and general insurance. Both these insurances are essential as they save us from several risk factors. It is interesting to note that both life insurance and general insurance are a kind of investment. We get money from what we pay. Thus, both life insurance and general insurance are a significant part of an individual’s life.