General Insurance – Meaning & Types
Life insurance protects people. General Insurance protects everything else: Your Health, Car, House, Travel, and even your Mobile Phone.
Principle of Indemnity
General Insurance works on the Principle of Indemnity.
- Meaning: Usage is to restore you to the financial position you were in before the loss.
- Rule: You cannot make a profit.
- Example: If your ₹5 Lakh car is stolen, insurer pays ₹5 Lakhs (Indemnity). They won't pay ₹10 Lakhs.
Types of General Insurance
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1. Health Insurance (Mediclaim)
Pays for hospitalization expenses. Given rising medical inflation (10-15%), this is crucial.
2. Motor Insurance
- Third Party (Mandatory): Covers damage you cause to others.
- Own Damage: Covers damage to your vehicle.
3. Home Insurance
Protects the building (structure) and contents (TV, Jewelry) against Fire, Earthquake, and Theft. Costs as little as ₹2000/year for ₹20 Lakh cover!
4. Personal Accident Insurance
Pays a lump sum in case of accidental death or permanent disability (e.g., loss of limb).
General vs Life Insurance
| Feature | Life Insurance | General Insurance |
|---|---|---|
| Subject | Human Life | Assets / Health |
| Duration | Long Term (20-30 years) | Short Term (Usually 1 Year) |
| Event | Certain (Death happens eventually) | Uncertain (Fire may never happen) |
| Principle | Assurance | Indemnity |
Summary
- Asset Protection: Don't let a fire or accident wipe out your wealth.
- Short Term: Contracts are usually renewed annually.
- Indemnity: Compensation acts strictly to cover the loss.
Quiz Time! 🎯
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Next Chapter: Health Insurance Deep Dive! 🏥