Article

Understanding General Insurance and Life Insurance
January 30 , 2013

What is life insurance?

As the name indicates life insurance covers risk of losing income because of premature death. When you buy a life insurance policy you enter a contract with the insurance provider who promises to pay your beneficiaries a sum of money in case you die prematurely. In turn you pay premiums to the insurance provider.

Life insurance policies have notoriously evolved to include insurance cover and investment in a single package. However in reality these serve the purpose of neither insurance nor investment owing to high charges, low returns and less insurance component. Traditional plans and ULIPs come under this category. Insurance policies offering pure insurance are called term plans.

What is general insurance?

General insurance covers risks to assets. It includes all kinds of insurance baring life insurance. Health policies, motor insurance, travel insurance, home insurance, personal accident insurance and business insurance. All general insurance policies are term policies.

Life insurance vs general insurance

Life insurance companies sell only life insurance policies and general insurance companies sell only non-life policies. However IRDA, the insurance sector regulator, has relaxed norm for health insurance and personal accident policies. Since these cover risk to life of an individual, these days both life insurers and general insurance companies sell these policies. Personal accident policy is offered as a rider by life insurers but health insurance is offered as a stand-alone by many life insurers. There are 3 pure health insurance companies. These also come under general insurers.

In terms of premiums collected, life insurance industry is much bigger than general insurance industry.

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