4 min read
Updated on Oct 10, 2022
An insurance policy in simple terms is a mutual agreement between the insurer and the insured. The insured pays regular premiums to the insurer to avail of financial coverage in case of a mishap. The concept of insurance policies was launched to protect the lives and valuable assets of an individual and hence, life insurance and general insurance policies were designed.
A life insurance policy is a safety net that covers your life. If the policyholder, unfortunately, loses his life within the policy term, a predetermined financial compensation shall be paid by the company to the appointed nominee.
A life insurance policy can help you take care of the needs of your loved ones even when you are not with them. Life insurance plans become all the more important if you are the primary earner in the family.
Apart from the lives of your loved ones, there are some valuable assets that need protection too. General insurance policy offers coverage for the damages caused to non-life assets, due to natural calamities or other reasons.
|Difference in||Life Insurance Plans||General Insurance Plans|
|Coverage||Offers financial coverage for life protection of self and family||Offers financial coverage for the protection of non-life assets, like home, car, etc|
|Policy duration and payments||This plan is available for a long-term duration with regular payments of premiums||This plan is available for a short-term duration and needs regular renewal. Generally, the entire payment is made at the time of renewal|
|Purpose of the plan||Provides the nominee with the sum assured in case the policyholder loses his life||Compensates for the loss or damages caused to the valuable assets due to natural or man-made reasons|
|Insurance claims||The company pays the insured amount either on the occasion of maturity or pre-mature death of the insured||The company pays a certain amount as compensation if an unfortunate event arises|
|Savings component||Investment options are available along with life protection||Not available|
Life insurance and general insurance sound similar and thus, are often misunderstood. However, as you have read above, there are clear differences between life insurance and general insurance which set them apart. Before you invest your savings, you should know and understand their differences. This will help you understand how they work and what would suit you when.
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