Difference between Life Insurance and General Life Insurance

To lead a comfortable life, pre and post-retirement, doing the right financial planning is necessary. It involves

several components out of which general and life insurance plays an important role. People often get confused between Life Insurance and General Insurance. The reason is that both general and life insurance are necessary for protecting various interests in various sectors like health and life. To help you in making the right financial planning, we will discuss here the difference between financial plans so that you can secure the right protection for yourself and your loved ones.

What is General Insurance?

General insurance is a kind of non-life insurance that offers coverage against various risks and losses. Some common types of General insurance include health, motor, home, personal accident, and travel insurance. They are typically short-term, and the premiums are relatively lower than life insurance policies.

Different Types of General Insurance

Motor Insurance

Car insurance, commercial vehicle insurance, and bike insurance all are part of Motor Insurance. Offers protection to your vehicle against the number of damages. You can go with a simple third-party cover that safeguards you against all damages to other vehicles, persons, or property by your insured vehicle. Under the Motor Insurance plan, if you go with a comprehensive motor insurance plan, it will cover not only damages that happen to the vehicle but also personal injuries as well as any third-party damages. Many insurers offer long-term motor insurance policies, the hassle of renewing your motor insurance policy every year.

Health Insurance

Health insurance is of different types like critical illness insurance, family floater plans, senior citizen health plans, and so on. By buying, a health insurance plan keeps you financially secured against the expenses arising from medical emergencies arising from accidents, injuries, and illnesses that lead to hospitalization, treatments, or surgeries. In health insurance plans, the coverage and sum insured are according to the financial needs and life goals of the policyholder. Health Insurance Plan is your financial friend that ensures in case of medical contingencies, you and your loved ones need not dip into your savings to pay hospital bills and other costs such as post-treatment care and medication.

What is Life Insurance?

Buying Life insurance is buying financial coverage against all unforeseen circumstances, premature deaths, and accidents. If you are the sole breadwinner in your family, it is like securing the financial future of the family after demise. To avail of the benefit of a Life Insurance Plan, you are required to pay a nominal premium and in return, the company pays the nominee a lump sum (also known as the death benefit). Some life insurance policies available in India are term insurance, whole life insurance, endowment plans, and ULIPs (Unit Linked Insurance Plans). They are long-term, and the premiums are generally higher than general insurance policies.

Different Types of Life Insurance Plans

Term Insurance Plan

Term Insurance plans are one of the most preferred policies as they offer affordable coverage at less premium. Under this plan, one gets a death benefit in the form of a lump sum amount. Apart from that, there is a maturity benefit in the term insurance plan, return of premium.

Endowment Plans

Anyone who is looking for a plan that offers both insurance and investment benefits, then go with the endowment plan. Under this plan, some portion of the investment categorize as sum assured, and the rest of the same for investments. In case of the policyholder’s death, the nominee receives the sum assured as a death benefit. If the policyholder survives, he/she gets both the maturity amount as well as the accumulated bonus.

Money Back Plans

Money Back Plans work like an endowment plan only, the major difference is that under the money-back plan, the policyholder has to pay a premium at frequent intervals.

For instance, if you have invested in a policy with a term period of 15 years.  According to the terms of the policy, you receive a certain amount at the end of the 5th and 10th year. You get the sum assured and accumulated bonus at the end of the policy.

Unit Linked Insurance Plan

As per the Unit Linked Insurance plan, half of the amount one has to invest in the market securities after evaluating the risk factor. These market securities could be anything debt, equity, or hybrid assets. The lock-in period in ULIP is 5 years. It allows partial withdrawal. It offers the benefit of life cover and the opportunity to create a significant corpus for your future.

Whole life insurance plan:

As the name suggests, the Whole Life Insurance Plan offers life cover to the policyholder for their entire life until the premium is paid. If the insured person passes, the policyholder’s nominee will remain financially secured.

The right time to purchase Life Insurance

Early age- When you buy life insurance in your early 20s or 30s, life insurance premiums are typically lower and the coverage amount is higher.

Your Health- The healthier you are at the time of buying a policy, the more you will enjoy with respect to coverage.

Your Financial Goals- If you are the sole breadwinner in the family, you may need life insurance to protect them.

The right time to buy General Insurance

The best time to buy General Insurance is when you have sufficient assets and liabilities in store with you. Like if you have your own house, you can go with home insurance, or if you are traveling frequently, you can go with travel insurance.

For example, if you are sued for damages after a car accident. However, you have the general insurance policy to rescue you. They will have your back and will cover your legal fees and any damages that you are liable for the same.

Bottom Line

Both life insurance and general insurance policies aim to fulfil your financial goals. The former aims to provide coverage to you and your loved ones, while the latter safeguards health and valuables against unpredictable situations.

One protects from life risk, and the other protects in case of any emergency or loss. To live a stress-free life, understand the difference between different types of insurance and procure the one that suits your requirements. Consult a professional to make an informed decision and get yourself, your family, and your assets adequately covered.

Frequently Asked Questions

1. What is the difference between general insurance and health insurance?

Health insurance is a part of general insurance. Health insurance designed to cover the cost of medical treatment and care. Health insurance covers expenses like medication, doctor consultations, and other medical expenses.

2. Get to know about the 7 principles of insurance?

There are 7 basic principles of insurance- utmost good faith, indemnity, loss of minimization, proximity cause, subrogation, and contribution.

3. What is the full form of IRDAI?

It is the Insurance Regulatory Development Authority of India, a statutory body formed under an Act of Parliament, i.e., Insurance Regulatory.

4. Is IRDAI under RBI?

IRDAI (Insurance Regulatory and development authority of India) The IRDAI functions to regulate the functionality of insurance schemes and policyholder activities. The insurance companies are bound to follow the rules under the RBI and function accordingly.

5. Why is life insurance better than general insurance?

Life insurance covers the individual’s life, and fixed health benefits. General insurance covers non-life assets, such as houses, vehicles, health, events, travel, and more. In case the insured dies during the policy term, the nominees receive the sum assured.