The world of insurance offers protection against different life risks so you can live without worrying unnecessarily about the future. Individuals buy insurance for many reasons, and one of the most common reasons for investing in insurance is to safeguard one’s family and loved ones in case the unfortunate happens.
It offers peace of mind knowing you are leaving them behind with something to work with to continue their life in your absence. It provides you with much more if you get the right coverage for the right kind of insurance.
To protect yourself and your family against such situations, you must understand the difference between life insurance and general insurance. Both types of insurance come with benefits that are suitable for different individuals. So, keep reading to learn more about the difference between life insurance and general insurance. We will also discuss a few tips for choosing between life and general insurance.
What is Life Insurance?
Before we understand the difference between life insurance and general insurance, let us discuss what is life insurance.
Life insurance policies offer financial aid to the listed beneficiaries of the policyholder in the event of their death. It pays a lump sum to the listed beneficiaries upon the policyholder’s death. This amount can be used to either pay for funeral costs or can be used to pay for children’s education, etc. Term and whole life insurance are the two types of life insurance policies.
What is General Insurance?
After understanding what is life insurance, let us learn about general insurance. General insurance protects against losses or damages to property, health, or assets. It covers many risks, including car accidents, theft, fire, and natural disasters. Under general insurance policies, there are other policies such as motor insurance, health insurance, travel insurance, home insurance, etc.
What is the Difference Between Life Insurance and General Insurance?
Life insurance and general insurance are two contrasting types of insurance policies that provide coverage against different types of risks. Following are some of the significant difference between life insurance and general insurance:
- Coverage: Since coverage is the most crucial aspect when choosing insurance, it is essential to know that life insurance offers coverage against the risk of sudden death. In contrast, general insurance provides coverage against a range of hazards, such as accidents, theft, fire, natural calamities, and so on.
- Purpose: Life insurance policies provide financial security to the policyholder’s family in case of their untimely demise. In contrast, general insurance policies cover losses or damages to property, health, or damages incurred due to various such risks.
- Premiums: The premium rates for different types of insurance can be adjusted or customised. However, the premium rates for life insurance are higher than those for general insurance.
- Maturity Benefits: Life insurance policies offer a maturity benefit or a death benefit to the policyholder, wherein the policy beneficiary gets a lump sum as a death benefit in the event of the sudden demise of the policyholder. In contrast, general insurance policies do not provide any death benefit to the beneficiaries.
- Tax Benefits: Life and general insurance offer tax benefits under different sections of the Income Tax Act. However, the amount of tax deductions one can avail differs according to their insurance type and premium rates.
Now that you have understood the difference between life insurance and general insurance let’s briefly look at some tips you can employ to choose between the two types.
Tips on Choose Between Life Insurance and General Insurance
Following are some tips that can help you in choosing the right insurance between Life Insurance and General Insurance for your yourself:
- Review and understand the difference between life insurance and general insurance.
- Assess your insurance needs based on your present situation and future needs.
- Evaluate your budget and how much you can afford to pay for insurance.
- Consider your level of risk appetite and how much risk you can take on financially.
- Research and compare different insurers and insurance plans.
- Seek advice from a trusted insurance agent or financial planner.
- Understand the exclusions and limitations of your policy.
- Review and update your insurance coverage timely.
Bottom Line
Therefore, life insurance policies are tailored towards offering financial security to the policyholder’s family in case of their untimely death. In contrast, general insurance policies provide coverage against day-to-day life risks such as accidents or theft. Understanding the difference between these life insurance and general insurance is imperative to make informed decisions for securing the financial future of you and your family.
