Insurance is termed as a contract where an individual or an organization applies for financial protection from an insurance company and is represented in the form of a policy. This topic comes under the category of “Economics”. Kindly bookmark this topic for future use.
Life Insurance :
The type of insurance which covers the person’s life is known as life insurance. Based on the insurance policy of this category, the insurer can also compensate for events like critical illness. It is divided into two categories- “Term insurance and Endowment insurance”. In term Insurance, insurance is done for a fixed period of time and is one of the most popular life insurance nowadays. It covers full risk against any kind of event. The second category of life insurance is endowment insurance which is for the whole life of a person and offers life risk insurance with combined benefits of life insurance and savings.
Types of life insurance :
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Term life insurance Plan:
It is the most affordable and preferred policy which offers decent coverage. With this kind of plan, the customer is insured for a fixed amount of time. This policy offers death benefits too by providing the sum assured, to the nominee, if the holder of the policy dies suddenly.
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Endowment Plans:
This plan is termed as a unique life insurance plan as it covers both insurance and investment. In this, if the policyholder survives, then he/she gets both maturities as well as accumulated bonus and in case of his/her death during the term period, the nominee receives the amount which is assured.
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Unit-linked insurance Plans (ULIP):
In this plan, the premium paid by the policyholder is invested in halves. One-half is invested in insurance coverage and the rest of the amount in the market, just like in the case of mutual funds. It does have a lock-in period of 5 years and allows the withdrawal of money on a partial basis.
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Money Back Plans:
The working of this plan is just like an endowment plan, but here the beneficiary need not to wait for the policy to get mature to own the returns. After a fixed interval of time, this plan pays returns within the time of the policy period.
General Insurance :
General insurance refers to insurance contracts that do not fall under the coverage of life insurance. It offers financial compensation on any kind of loss or any kind of damage other than life. Fire, marine, motor, accident, and other non-life insurance are all types of general insurance. General insurance protects us and the things we value, such as our houses, automobiles, and belongings from fire, flood, storm, earthquake, theft, car accidents, and travel disasters, etc. Basically, this type of insurance covers almost everything.
Types of General Insurance :
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Health Insurance: This insurance policy is one of the most common types of general insurance which people take. It covers medical expenses during medical emergencies. Basically, it provides financial assistance to the people if needed. Also, there are many types of health insurance plans in the market that are available and one can easily choose from them to cover expenses.
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Home Insurance: This plan of insurance cover the expenses against natural calamities such as earthquake, floods, theft, etc, which damages the belongings of one’s home.
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Travel Insurance: This type of insurance is taken by a person when he/she is about to start his/her journey. It provides compensation if there is any loss of valuable things such as baggage, passport, cancellation of the trip, etc.
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Motor Insurance: This insurance is for two-wheelers and four-wheelers. It secures vehicles and provides the amount against any mishappening such as accidents, terrorist attacks, riots, thefts, or any natural calamity.
Further, it is divided into two types:
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Comprehensive Insurance: This plan covers both parties that are involved in an accident.
- Third-Party Insurance: This provides cover only to the third party involved in an accident.
Difference between Life Insurance and General Insurance:
| Life Insurance | General Insurance | |
|---|---|---|
| 1. | This type of insurance covers the life-risk of the person insured. | This type of insurance does not cover the insurances which are not covered under life insurance. |
| 2. | It is a form of investment. | It is only a contract of indemnity. |
| 3. | It is a long-term investment. | It is a short-term investment. |
| 4. | Its premium should be paid over the year. | Its premium should be paid all at once rather than in installments. |
| 5. | Insurable interest must be present at the time of the contract. | Insurable interest must be present at the time of contract and loss both. |
| 6. | The amount of the insurance done is either given on maturity or the happening of an event. | Loss is refundable and liability will be repaid on the happening of an uncertain incident or an event. |