Insurance is a tool to get coverage and protect your finances if anything unpleasant happens to the insured person or object. You can divide insurance into two major categories based on the person or object insured – Life insurance and general (non-life) insurance. If you are looking forward to purchasing general insurance in particular, then there are a few things you must keep in mind. Read on to get an idea of what is general insurance, the available types of general insurance, and the precautions before a purchase.
What Is General Insurance?
General insurance provides coverage for everything other than life. It means you can purchase general insurance for any of your assets, activity, or even health and obtain returns in case of any damage. So, with the help of general insurance, you can ensure your properties, domestic/international travels, health, and much more.
It works in a similar way to life insurance, where the policyholder has to pay a premium for a set duration and gets coverage during this duration. However, there is no provision of maturity amount which is available with certain life insurance policies. However, the premium amount for general insurance is not as high as life insurance. And several discounts, offers, bonuses, no-claim bonuses, and tax savings make the premium less burdensome.
In general insurance also, you have to raise a claim if anything unexpected happens to the insured item or person. The insurer verifies and only after a thorough examination approves the claim. The chances of claim rejection are high in general insurance as there are several cases where people file fraudulent claims. Given below are some popular types of general insurance available today.
- Health Insurance
- Motor Insurance
- Travel Insurance
- Home Insurance
- Special Category Insurance
How Is General Insurance Different from Life Insurance?
General insurance is a large market in India, with almost INR 1.9 lakh crore premiums paid in 2019-20 alone. This is one-third of the total investment in life insurance in the same year. But considering the fact that there are no returns on investment, this is a pretty much high amount showing its importance as a protection tool. So, after knowing what is general insurance, you must also know how it is different from life insurance. It will provide a clear image of how it is very different from life insurance other than the financial coverage protection part. Given below are the major differences between general insurance from life insurance.
A general insurance premium will always be lesser than life insurance for the same insured amount. This low premium amount helps purchase insurance for important things accessible to all, disregarding the financial capacity.
The policyholder can get several discounts on the premium amount during the early renewal. No claim bonus, usually seen in motor insurance for not raising a claim, can provide discounts for up to 50% of the premium amount. Life insurance doesn’t have any such discounts or offers on the premium, and you have to pay the same amount till maturity.
No Limitations on Renewal
Legally speaking, life insurance policies are only valid until the person reaches 60 years. Even though there are insurance companies that provide insurance for people older than this, they do it at their own risk and at extra premium rates. But in general insurance, there are no limitations till when you can renew your insurance as long as it clears the annual inspection. So, for well-maintained properties, you can renew your insurance for several decades.
Low Claim Amount
The claim amount of general insurance is also low compared to life insurance, mainly due to the lower premium amount. If the policyholder wishes to purchase insurance with a higher claim amount, they will have to go with a similarly high premium.
No Return of Premiums
No return of premiums is the major drawback of general insurance. This does not make them eligible to become savings or investment plans.
5 Mistakes to Avoid While Purchasing General Insurance
Like any other expense for future financial protection, general insurance requires well-informed decisions to ensure that there are no flaws in the policy. These flaws cause claim rejection on silly mistakes, which will then cost a lot of money. So, to avoid putting yourself in such situations, it is good to purchase plans by avoiding such mistakes. Given below are the five major mistakes you must avoid while purchasing general insurance.
- Having a lower insured amount
- Not comparing general insurance plans
- Not reading the term and conditions of the policy
- Not understanding the claim procedures
- Not choosing a reliable insurer
Knowing what is general insurance and the types of general insurance will help you make the right choices while selecting a plan. The common mistakes that people usually make while purchasing are also important to understanding the purchase process. Your own purchase of general insurance will also become a lot easier if you understand these important precautions. With the help of these, you can select the most suitable general insurance plan from several available plans.