Differences Between Life Insurance And General Insurance

When laying the foundation for financial security and wellbeing, insurance is one of the key factors to be included. Insurance comes in various forms. Broadly, it can be categorised into life insurance and general insurance.

Before you go ahead and buy any type of insurance, it is necessary to understand the difference between the two. What are life insurance plans? Which are the types of general insurance? Which ones do you need? It is essential to know the answers to these questions before building your financial portfolio.

Let’s take a look at the types and benefits of life insurance and general insurance, the differences between the two, and which plans you should get and why.

Life Insurance

Life is full of uncertainties, but you may still want to do your best to protect your loved ones against these uncertainties. Life insurance plans can help you do so.

These are plans that act as a contract between the policyholder and the insurance provider. For example, when you buy a life insurance plan, you are required to pay premiums to uphold your side of the contract. In return, the insurance provider will offer you the benefits of life insurance, primarily death benefits. Depending on the type of plan you choose, you may also be offered other benefits, such as accidental death benefit, survival or maturity benefit, and premium waiver.

Before you buy any life insurance, it is advisable to use a life insurance premium calculator. It will help you get a clearer picture of what your premium amount would be for the sum assured and the policy duration you desire.

Life insurance premium calculators are easily available online on websites of insurance providers or third-party insurance aggregators. The online calculators on insurer websites or apps tend to be a tad bit more plan-specific.

Let’s take a look at some of the common types of life insurance.

• Term life insurance

This is one of the most basic forms of life insurance. It does not offer any maturity benefits but is most known for being affordable as compared to other types of life insurance, and simpler in design.

• Whole life insurance

Whole life insurance plans offer coverage for up to 99 years of age. In other words, it is a plan offering long-term coverage alongside maturity benefits. If you are looking for a plan with the longest duration, this may be the right option for you.

• Endowment plans

These are plans offering maturity benefits but can be taken for a shorter duration than whole life insurance plans. They can act as savings plans. You can take an endowment plan for as low as 10 years. However, the minimum term duration may depend on the sub-type of policy chosen and what the insurance provider offers.

• ULIP

Unit-linked Insurance Plans, better known as ULIPs, are insurance plans offering investment benefits as well. When you buy a ULIP, you have a part of your premium redirected towards wealth creation. Thus, you are able to get dual benefits with a single policy, if that is what you seek.

General Insurance

While life insurance plans cover the risk to life, general insurance offers coverage for other peripheral things that may be an important part of your life. This includes your home, your health, your vehicles, and any other things that may be valuable to you. Types of plans categorised as general insurance protect these belongings as well as your health against any risks and threats.

Let’s take a look at the type of general insurance that consumers should be aware of.

• Health insurance

This is, arguably, one of the most important types of general insurance. There is seldom a person who does not consider their health, their physical and mental wellbeing, as a valuable asset. When such is the case, one would agree that it needs to be protected against risks. Health insurance can help you protect your health by offering financial support for healthcare.

• Vehicle insurance

Vehicle insurance, also known as motor insurance, is often a requirement when you own a vehicle. There are a few sub-types of motor insurance, each one serving a specific purpose, that you may have to get for your vehicle. It protects your belonging against any damage.

• Property/Home Insurance

Just like how motor insurance protects your vehicle, home or property insurance protects your house. Commonly covered risks include man-made as well as natural calamities.

• Travel Insurance

Travel insurance covers a variety of risks you may encounter when travelling. Some of the commonly covered risks include loss of valuables or baggage, medical emergencies, trip cancellation, and more.

The most important difference that can help you distinguish between life insurance and general insurance is that life insurance covers risks to human life, while general insurance covers almost every other type of insurance.