Consider this scenario: you are planning a vacation through the colourful cities of Europe. It takes a lot of meticulous attention to detail, from bookings to itinerary. Your flight has a layover, and the connecting flight gets delayed. It has a domino effect and you’re forced to reschedule all things on the itinerary, not to mention you are stuck at the airport. It cost you around Rs 30,000 for the tickets and you also had to bear the hotel booking cancellation charges. A simple travel insurance policy worth Rs 500 could have saved you from all the unnecessary expenses and hassle.
We usually shirk away from talking about death but consider another scenario: a friend of yours meets with an accident. He, unfortunately, passes away and is survived by a wife, two kids and one elderly parent. He had minimal savings which are barely enough to cover three months’ worth of basic expenses like bills, groceries etc. A life insurance plan could have ensured that if he paid a premium worth Rs 7,500, the family would receive around Rs 10 lakhs under the circumstances, and therefore, be financially cushioned to continue their lives amidst the loss.
The two examples you read above are classic instances where insurance policies can help mitigate the financial burden, but there is a difference in the purpose they serve, the occasions they are used for and the nature/extent of coverage that they provide, which means that it is crucial to have an understanding of the difference between life insurance and general insurance.
Difference between life insurance and general insurance
1. Meaning and Coverage:
As the name suggests, life insurance covers the life of the assured, whereby in the event of his/her premature demise, the nominee or beneficiary as stated on the policy is paid the sum assured by the insurance company. So, life insurance covers your life, with some variants of the policy providing an investment feature too. The policy also comes with a maturity benefit - if you, the policyholder, outlive the policy period, you receive a maturity benefit, which is essentially a return on the premiums you paid through the years. On the other hand, general insurance is a contract of indemnity which involves non-life assets. Therefore, it includes all kinds of non-life insurance, namely motor insurance, travel insurance and health insurance, among others. It compensates you for the damages it promises to cover, but has no savings or investment tangent.
The main purpose of life insurance is to provide for your family and dependents in your absence. Financial independence for your family could mean helping them maintain their lifestyle, provide for kids’ education, square off your liabilities and provide for daily needs through the death benefit on such plans. Essentially life insurance death benefit is paid out in case the policyholder dies, or the maturity benefit is paid in the event that the policyholder survives the policy duration. On the other hand, general insurance makes claims settlement and payouts in the event of an unexpected material loss such as accidental damages or theft or disfigurement of vehicle or travel glitches. These are essential in the form of compensation for the loss to the extent they are covered under the policy papers.
3. Duration of the policy:
By the nature of its coverage, life insurance is a long-term contract. You pay monthly premiums for a long time until the policy reaches maturity. General insurance is a short-term contract. In the case of motor insurance or health insurance, you may have to renew the policies on a yearly basis, with options for up to 3-years’ policies at once. Travel insurance would only last as long as its purpose - your travel - does. It will require you to pay the entire premium up front.
4. Insurable Interest:
In the case of life insurance in India, the policyholder may likely only be present at the time of issuance of the policy, because the claim occurs upon his/her death. For general insurance, it is imperative that the policyholder is present both at the time of issuance of contract and at the time of loss/filing a claim.
5. Process of Claim payment:
Life insurance policies with investment elements, pay the amount on either maturity or on the occurrence of the event. Under general insurance, claim for losses is filed whenever the event occurs. Due diligence is carried out often to make sure the policyholder did everything to prevent the damage and only then the claim is approved. This claim is also restricted to the amount of damage, whereas life insurance claim is paid in full.
You can choose an appropriate online life insurance plan from a wide array of policies offered by Future Generali, and depending on whether you want an element of investment, you can go for the Future Generali Easy Invest Online Plan. Such a plan will also provide the flexibility to choose the period of protection and the period of premium payment. If you are solely looking at long-term protection at affordable rates, choose a term insurance plan. It is noble to make sure your family doesn’t suffer financially in your absence!