What is the difference between General Insurance and Life Insurance?
Mini Balakrishnan
The main difference between general insurance and life insurance lies in the types of risks they cover and the purpose they serve. Here’s a breakdown of the distinctions:
General Insurance
- Coverage: General insurance provides coverage for non-life risks such as property, vehicles, travel, health, business, and liability.
- Duration: General insurance policies are usually short-term, typically spanning one year. They need to be renewed periodically to maintain coverage.
- Premium Calculation: Premiums for general insurance are calculated based on various factors such as the insured item’s value, risk factors, coverage type, and duration.
- Payouts: In the event of a covered loss or damage, the insured receives financial compensation from the insurance company, up to the policy’s specified limits.
- Beneficiary: General insurance policies typically do not have designated beneficiaries. The compensation is provided directly to the insured.
Life Insurance
- Coverage: Life insurance provides coverage for the risk of loss of life or critical illness of the insured person. It offers financial protection to the policyholder’s beneficiaries or dependents.
- Duration: Life insurance policies are long-term contracts that can span several years or even the insured person’s entire life, depending on the policy type.
- Premium Calculation: Premiums for life insurance are calculated based on factors such as the insured person’s age, health condition, lifestyle, coverage amount, and policy duration.
- Payouts: In the event of the insured person’s death or critical illness, life insurance policies pay out a lump sum amount or regular income to the designated beneficiaries or the policyholder.
- Beneficiary: Life insurance policies have designated beneficiaries who receive the death benefit or critical illness payout as specified in the policy. These beneficiaries can be family members, dependents, or anyone chosen by the policyholder.
In summary, general insurance covers various non-life risks and provides compensation for losses or damages, while life insurance focuses on protecting against the risks of loss of life or critical illness and provides financial support to beneficiaries.
