The concept of insurance is quite simple. It is a way to protect yourself against any potential financial loss in the future. However, there are many types of insurance products available in the market today. The most popular types are general and life insurance, which offers different benefits and coverage options to their customers.
In this article, we will discuss both these products and highlight their differences so that you can decide which one suits your needs better:
General insurance covers losses caused by natural disasters, accidents, acts of god and other unexpected events. It includes property insurance, motor insurance, travel insurance and health insurance.
Life insurance is a contract between the insured and the insurer. The insured pays an annual premium to the insurer in exchange for a promise that, when the insured dies, the insurer will pay a sum of money to someone designated by the insured (the beneficiary). The beneficiary of a life insurance policy may be any individual or legal entity (e.g., charity). There are different types of life insurance as well such as simplified issue life insurance, term life insurance, whole life insurance, and more.
General insurance covers tangible property like cars, homes, etc. You can claim any damage to these assets. Life insurance, on the other hand, is meant to cover your family in case something untoward happens to you.
- If a car crashes into your house and damages it and/or some of its contents, general insurance will help you get back financially by paying for repairs or replacement of damaged assets.
- In case of death due to illness (but not suicide), life insurance will pay out the sum insured amount of money to your family members as per their nomination status.
General insurance covers you for a period of time, ranging from 1 year to 5 years. If your vehicle is damaged in an accident and has to be repaired, general insurance will pay for the cost of repairing it. The same is true if your home is damaged by fire or lightning or if you have an accident that leads to injury or death.
Life insurance, on the other hand, covers a person from birth until death. In some cases, it also provides financial assistance for dependents before and after death (depending on how much coverage was purchased).
The term “risk” refers to the chance that something bad will happen. In insurance, the risk is the chance that an insured event will occur (i.e., you’ll have a car accident or your house will burn down).
As per the experts at Ethos, “Risk management is a process of reducing risks in order to avoid negative outcomes.” Risk management involves taking steps (or “insurance”) to reduce risk so that any negative outcome won’t as likely happen.
In conclusion, there is a difference between the two types of insurance. When you buy life insurance, you are buying coverage that will pay out if you die. General insurance is something different and has different benefits than life insurance.