Module for Beginners
A beginner's guide to general insurance
So, if you’ll recall from the previous chapter, we saw an example where Subash had invested in life insurance for his father. But that’s not the only example of Subash being smart about personal finance. A couple of months ago, there was a huge fire at his house. The losses were quite substantial, and the repair work would have proven quite expensive. Thankfully, however, Subash had smartly invested in home insurance. And that saved his family from a huge expense that could have proven to be quite a burden financially.
This home insurance that Subash purchased, that falls under the category of general insurance. What is general insurance, though? And what are the different kinds of covers that fall under that category? That’s what we’ll find out in this chapter.
What is general insurance?
Just like how you can insure your life, you can also insure other things, like your house, your vehicle and your health, among other things. The broad term for this is general insurance. Also known as non-life insurance, general insurance is a kind of protective cover that’s offered for assets other than life.
Here too, there’s a legal contract between the insurer and insured. And just like it is with life insurance, the policyholder will have to pay a premium to the insurance company.
Why do you need general insurance?
So, you know the answer to the question: What is general insurance? But why do you need it? Well, simply put, general insurance protects you from a variety of other accidents and misfortunes that may not result in the loss of life, per se, but may cause other kinds of financial or non-financial distress. You’re perhaps thinking now that there are many kinds of misfortunes that may happen in life, isn’t it? Well, this is why there are different kinds of general insurance.
Come, let’s get to know the different types.
What are the different kinds of general insurance?
General insurance covers a wide range of insurable events. Consequently, they come in different kinds. Here are the five most common types of general coverage.
Medical emergencies occur in life, quite often, if we may add. As people get older, the body succumbs to a variety of illnesses – diabetes, heart disease, arthritis, and others. Even among the younger folk, there’s the possibility of acute illnesses or accidents resulting in hospitalisation. And medical bills are often too steep. Here’s where health insurance can help.
The items covered by health insurance plans differ from one provider to another. Broadly speaking, however, these are the things covered.
- Hospitalisation following an accident
- Hospitalisation following an illness
- Outpatient procedures
- Annual health check-ups
- Room charges
- Doctor’s consultation fees
- Other medical costs
- Pre-existing conditions
- Maternity benefits
- Critical illness
- Organ donation
- Alternate treatments under AYUSH
Home insurance comes in handy if there’s any damage or loss related to your house. Now, this may seem like a rare occurrence, but if your home is in an area that’s prone to calamities, you’ll find that home insurance is very necessary. Additionally, if you’ve just purchased a house or constructed one, a home insurance policy can be the protective cover you need to safeguard your asset.
Typically, a home insurance policy may cover the following incidents, events and items.
- Damages to your house and its surroundings due to natural or manmade calamities
- Protection to the plumbing and electrical wiring
- Loss of or damage to personal property and belongings
- Protection against public liability
- Burglary or theft
- Personal accidents
What’s your most prized possession? Perhaps a family heirloom, or perhaps, something that holds great personal value? Or maybe, it’s that new car you purchased? What if you wake up one day to find that overnight, heavy rains cause a tree nearby to wreck your newly purchased car? Is all the money you spent on it a waste? Well, not if you have a motor insurance plan in place.
This kind of general insurance offers protection to your vehicle. It includes, but isn’t limited to, the following things.
- Loss or damages due to natural calamities
- Loss or damages due to man-made calamities
- Personal accident cover
- Third-party liabilities
- Breakdown assistance cover
Perhaps you’ve been lucky enough to have smooth travel experiences so far. But you’re likely no stranger to the fact that accidents and mishaps can occur when you’re travelling. Travel insurance can save you from the financial implications of such occurrences. Based on the kind of coverage offered, travel insurance can be valid for Indian or international travels. Generally, these are the things covered by travel insurance plans.
- Medical emergencies
- Loss of baggage
- Loss of passport
- Accidents sustained during adventure sports
- Flight delays
Like individuals, businesses need insurance too. Here’s where commercial insurance comes into the picture. Depending on what it covers, commercial insurance can be purchased for property, engineering works, employee benefits, and even business interruption. These kinds of insurance help a business get back on its feet when something untoward occurs.
For startups and MSMEs, commercial insurance can be particularly beneficial. Large entities benefit too, because generally, the losses they incur could mount up to lakhs of rupees. And commercial insurance can help cushion that blow significantly.
So, this is how general insurance extends protection to assets other than an individual’s life. These kinds of insurance generally do not offer any tax benefits, except for health insurance, where the premium paid can be claimed as a deduction from your total income as per the limits specified in section 80D of the Income Tax Act. Nevertheless, these types of insurance are essential instruments that help ease out the financial distress brought on by unexpected accidents or incidents.
A quick recap
- Just like how you can insure your life, you can also insure other things, like your house, your vehicle and your health, among other things. The broad term for this is general insurance.
- Also known as non-life insurance, general insurance is a kind of protective cover that’s offered for assets other than life.
- General insurance covers a wide range of insurable events. Consequently, they come in different kinds.
- Health insurance covers the medical emergencies that occur in life.
- Home insurance comes in handy if there’s any damage or loss related to your house.
- Motor insurance takes care of damages that occur to your vehicle – like cars or two-wheelers.
- Travel insurance covers the accidents and mishaps can occur when you’re travelling.
- Commercial insurance helps businesses recover from the financial impact caused by damages to property or other assets, among other things.