Difference between Life Insurance and General insurance

Difference between Life Insurance and General insurance

The difference between Life insurance and general insurance is related to their type of contract. In life insurance, there is a contract of Guarantee. On the other side, general insurance is a contract of indemnity. To know more difference between them we have to know the meaning of both terms, so I am explaining the meaning of both terms as under: 

Meaning of Life insurance:

Life insurance includes the element of protection as well as an element of investment which provides financial support to the family after the death of the insured person or at the time of old age. Sometimes people take a life insurance policy to get financial independence during their old age. In both, the cases life insurance policy is very helpful.

In a life insurance policy, insured pay a fixed amount in the form of premium and get the compensation at the time of maturity or death whichever comes earlier. The time period for life insurance is generally 15- 20 years.

Elements of Life Insurance:

1.The contract between the insured and the insurer on the basis of the utmost good faith.

2.The principle of indemnity is not applicable to life insurance because we cannot estimate the loss due to the death of a person.

3. Insurable interest must be present at the time of taking the life insurance policy.

Meaning of General Insurance:

General insurance is non-life insurance. It covers Fire insurance, Marine insurance, Motor insurance. General insurance includes the element of protection only.

Elements of General insurance:

  1. General insurance is a contract of indemnity.
  2. Period of general insurance is basically of one year.
  3. No medical examination is needed in the case of general insurance.

 General Insurance companies in India :

  1. Bharti Axa General Insurance Co.Ltd.
  2. Bajaj Allianz General Insurance Co.Ltd.
  3. HDFC ERGO General Insurance Co.Ltd.
  4. and many more. 

The Chart of difference between Life insurance and General Insurance:

Points of differences

Life Insurance General Insurance
Meaning Life insurance includes the element of protection as well as an element of investment which provides financial support to the family after the death of the insured person or at the time of old age. General insurance is non-life insurance. It covers Fire insurance, Marine insurance, Motor insurance. General insurance includes the element of protection only.
Contract The contract between the insured and the insurer on the basis of the utmost good faith.

General insurance is a contract of indemnity.

Insurable interest Insurable interest must be present at the time of taking the life insurance policy. Insurable interest must be present at the time of taking the insurance policy as well as at the time of loss or damage.
Premium In a life insurance policy, the premium is fixed cannot be changed. In the case of general insurance, the premium may be altered at the time of renewal of the policy.
Medical Examination Medical Examination is a must for taking the life insurance policy.

No medical examination is needed in the case of general insurance.

Principle of indemnity The principle of indemnity is not applicable to life insurance because we cannot estimate the loss due to the death of a person. General insurance includes the principle of indemnity.
Time period The time period for life insurance is generally 15-20 years.

Period of general insurance is basically of one year.

Conclusion:

Insurance is the contract between the insured and the insurer in which the insurer agrees to pay for loss insured at the time of event happening in consideration of the regular payment by the insured. Life insurance includes the element of protection as well as an element of investment which provides financial support to the family after the death of the insured person or at the time of old age. On the other side, General insurance is non-life insurance. It covers Fire insurance, Marine insurance, Motor insurance. General insurance includes the element of protection only.

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References: –

https://vkpublications.com/

Also, Check our Tutorial on the following subjects: 

    1. https://tutorstips.com/financial-accounting/
    2. https://tutorstips.com/advanced-financial-accounting-tutorial

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