Difference Between Life Insurance and General Insurance?

Term life plans are the most basic life insurance plans offering financial protection to the beneficiary, in case the life insured does not survive the covered period. It is often preferred as it provides comprehensive coverage at an affordable premium.

Term Insurance with Return of Premium (TROP) is another type of term plan that offers maturity benefits along with death benefit. It requires a slightly more expensive premium. It is helpful to understand your specific financial requirements to calculate a suitable premium amount.

Whole Life Insurance plans provide cover to the insured for their entire life, or as long as the premiums are paid. It is an ideal choice for people who require extensive life coverage and want their family to be financially protected at all times.

Endowment plans are a combination of investment and insurance. A portion of the premium goes towards securing the sum assured, and the rest is utilized for investment purposes. It serves the purpose of amassing savings at lower risks and providing financial protection to loved ones during the policy term. Upon maturity, the insured will receive the sum assured.

ULIPs allow the policyholder to invest in mutual funds and ensure life cover at the same time. It is ideal for long-term financial goals as they help in wealth creation. Depending on one’s risk appetite portfolio, one can invest into various fund options i.e. equity (high risk), debt (low risk), or hybrid funds (medium risk).

Along with the death benefit, ULIPs offer partial withdrawal after the lock-in period of five years is over and also allows switching between funds.

Also Read: What is ULIP?

Money-Back policies provide the insured with a percentage of the sum assured at predefined intervals. These pay-outs are known as survival benefits. When the policy matures, the remaining amount of the sum assured is offered to the insured along with the accumulated bonus, if any.

A policyholder can generate funds for their child with the help of a child plan. It helps build a corpus that can be utilised in the future for child’s education or marriage. In the unfortunate case of the policyholder’s early demise, the beneficiary will get the sum assured.

A retirement plan helps you to plan do financial planning for post-retirement years when one might not have any source of income. Under such plans, a specific amount is regularly paid to build up a corpus which is used to provide lifetime income to the insured at regular intervals after retirement.

Health Insurance offers coverage for medical and surgical expenses for the insured. It acts as a safeguard against medical emergencies. Depending on the terms of a health plan, the insurance provider either settles the bill directly with the hospital or reimburses the insured for their expenses.

Motor Insurance provides financial protection for personal and commercial automobiles against loss due to damage, theft, accident, fire, natural calamities, etc. Two significant types of motor insurance policies are:

• Comprehensive Insurance – This covers both the parties involved in an accident. Additionally, it offers protection against the scenarios mentioned earlier as well.
• Third-Party Insurance – This provides coverage for the third-party involved in an accident. According to the Motor Vehicles Act, all two-wheelers and four-wheelers must have third-party insurance.

If you travel frequently, it is beneficial to invest in a travel insurance policy. It offers security against loss of baggage, delay or cancellation of flights, accidents, or hospitalization expenses, during a trip.

A house is a valuable asset in a person’s life. Home insurance provides financial security against damages due to natural or human-made disasters that can damage the house or its belongings.

To understand these differences of life insurance vs general insurance better, let’s take a closer look at the key features of life insurance and general insurance plans.

Even though life insurance is often not a mandatory requirement unlike some types of general insurance such as car insurance, LI ownership in India is on a rise as more and more Indians seek financial protection against life’s uncertainties. This is observation is based on the 75% Life Insurance ownership figure recorded in the IPQ 6.0 survey. Read the full report of the Max Life IPQ 6.0 survey conducted in association with Kantar for further details.