While everyone advises you to get insurance for yourself, your possessions, and your loved ones, no one talks about the different kinds of insurance that are available. Most of you now must be aware of the two basic types of insurance: life insurance and general insurance. However, there must be a simple question in your mind, what are the key differences between the two, and how can they benefit you and your family in your hour of need? Picking the right insurance is vital if you want to reap its advantages. Here is a simplified yet detailed guide on insurance, so you know when to choose what.
Just like the name suggests, life insurance is a cover for your life. Life insurance can offer your family monetary relief in difficult times. This type of insurance provides financial security to the nominee (spouse, children, etc.), in case of an unfortunate event. It also serves as an investment tool in some cases. Here’s all you need to know about life insurance.
This plan is unique because it is a combination of insurance and investment. A part of the premium is reserved for the policy and the sum assured, while the other part is used for investments. On maturity, the nominee or the policyholder gets the sum assured as well as the bonus earned from investments
While life insurance covers the life of a person, general insurance provides cover to other aspects and assets in a person’s life, for example, health, car, travel, home, etc. This type of cover insures assets against theft or damage due to fires, natural calamities, accidents, man-made disasters like riots or terrorist attacks, etc. While life insurance policies provide cover against the risk of life, general insurance provides cover against other types of risks that may affect a person’s health or some of his/her physical assets like a home or a vehicle etc.
Now that you know the meaning and types of life and general insurance; let’s move on to some significant differences between the two.
One major distinction between the two is the duration of the policy. Life insurance plans are long-term plans and require policyholders to either pay a lump sum premium, or regular monthly, quarterly, or yearly premiums for a significant amount of time. For example, 15-20 years or up to a lifetime.
General insurance, on the other hand, is a short-term plan that is generally renewed yearly.
The premium for a life insurance policy is paid at regular intervals like monthly, quarterly, or yearly. In contrast, the premium for a general insurance policy is paid at once, either when the policy is bought or when it is renewed. This may differ in the case of a travel insurance plan, where a person pays a premium only while buying insurance for a specific trip.
In the case of a life insurance policy, the sum assured is paid to the nominee during the policy term in the event of the policyholder’s death. The sum assured can also be returned to the policyholder on maturity. In the case of endowment and money-back plans, the insurance provider also pays back the interest earned on investments. Another important thing to note is that in case of a critical illness, the policyholder can claim life insurance benefits upon diagnosis of the disease or health condition covered under the policy if the relevant rider is chosen during the purchase of the policy.
The insurance claim of general insurance can depend on some specific events. For example, general health insurance can only be claimed after hospitalisation, in case of a medical emergency or ailment diagnosis, depending on the policy. In the same manner home, motor, or travel insurance can be claimed only if there has been any loss or damage to an asset due to an unfavourable event like a robbery, accident, or any such event.
The policy value for a life insurance plan depends on the preference of the policyholder. One can fix the sum assured depending on the requirements of his/her family and the ability to pay premiums. The sum assured is then paid back to the policyholder on maturity or to the nominee in case of an unfortunate event.
As opposed to life insurance, the policy value of general insurance is influenced by the value of the asset. The policy value, in this case, is based on the damage suffered and not on the sum assured.
Life insurance has a component of savings and General insurance has no such component. Life insurance is an insurance against life- risk only and General Insurance is insurance against motor, fire etc.
Contact us at Shimin Insurance Agency, we are the leading insurance agency in Kenya, providing car, home, business, health insurance, Life and any other general insurance. Through establishing partnerships with various reputable insurance companies in the industry, the Agency has developed a full banquet of innovative insurance products and services that address the insurable needs of our customers and offers these services from across our branches in Kenya.