Difference between Life Insurance and General Insurance

Doesn’t it keep haunting us all the time to think about the unpredictability of our lives and the unexpected things that keep bombarding us? The uncertainty of life makes it mandatory for each of us to have insurance policies to ensure not only our but our loved ones’ security and safety.

But just having insurance is of no help, we must make sure that we choose the right policy that fulfills its purpose and delivers the value we expect. For choosing the right policy, it is necessary to know the differences between the prevalent prominent policies. Here’s a little help to make you familiar with the difference between Life insurance and General Insurance, the two broad categories of the insurance industry.

Following are a few points to highlight the key differences between the two leading policies:

Differences between life insurance and general insurance

1. Purpose

The most significant difference between life insurance and general insurance is in the purpose they serve. Life insurance is the promise to compensate for the insured’s death, which means the family of the insured will receive a fixed amount after the death of the insured. The amount can also be availed right after the policy’s maturity. Whereas, general insurance protects the insured’s important assets. In addition, it provides compensation in case of financial losses caused due to natural calamities, theft, terror attacks, and any such unfortunate events.

2. Term of contract

Life insurance policies are long-term plans lasting for a minimum of 15-20 years. Whereas, general insurance policies may or may not be long-term plans. The tenure of the policies completely depends on the will of the insured.

3. Planning finances

In the case of life insurance, it can be used as a source of investment for several other financial goals or requirements such as retirement, a child’s education, and more. On the other hand, general insurance is a type of insurance that will only safeguard your valuables from any particular crisis as mentioned in the contract.

4. Value of the insurance

The value of a life insurance policy is fixed by and depends upon the policyholder. Factors like the needs and requirements of the policyholder, the capacity of the policyholder to pay the premiums, etc. play an important role in deciding the amount of the insurance.
As opposed to life insurance, the amount of general insurance depends upon the value of the asset or commodity insured.

5. Insurable interest

In the case of a life insurance policy, the insurer may only be present at the time of issuance, and may or may not be present at the time of the claim. However, In the case of general insurance, the policyholder has to be present at both times. But for policies such as health insurance, a relative of the insured person can make a claim on the passing of the insured.

The method and other factors regarding payment of premium for both the policies are more or less the same. It must be noted that both of these insurances are equally important to safeguard our savings, assets, and future. It is a must to know the difference between life insurance and general insurance to prioritize things as per our needs. Understand the difference and be ‘smartly-insured’!