General Insurance

General insurance is a contract between a general insurance company and the policy buyer. As per this contract, the insurance buyer pays an amount called premium to the general insurance company. In return the company compensates the financial loss suffered by the policy purchaser due to the insured event.

An insured event is the happening of a certain contingency that causes loss to the insured and the insurance company becomes liable to pay only when the loss happens due to that event.

Being one of the two sub-categories of insurance, general Insurance has always been one of the key industries that drive an economy throughout the dawn of the civilization. It is on the back of general insurance, businessmen are able to take risks and churn the wheel of economic activities and build business ecosystems. So, it would not be wrong to say that general insurance is the backbone of every thriving economy in the world.

Not only at a macro-level, but also at a micro-level, general insurance is very necessary. It protects you from financial losses that can accrue because of any theft or damage to your valuable assets and possessions.

General Insurance
General Insurance Works

How General Insurance Works?

General insurance works on the principle of risk distribution and probability. The general insurance company charges a small premium from a large number of people exposed to a similar risk and form a pool of the funds collected after deducting the administration and marketing costs and profit margin. Let’s say, the general insurance company charges this premium from 1000 house owners. Out of which 10 get destroyed due to natural and unnatural calamities during the year. The insurance company compensates those 10 householders from that pool in which 1000 house owners contributed. In this way the risk gests distributed. The loss of 10 people is borne by 1000 people exposed to similar risk. Hence, the 10 people are saved from becoming bankrupt by paying an affordable annual premium.

Now, let’s talk about some popular general insurance plans available in India.

The common types of general insurance plans available in India are:

For an individual, the following are the common general insurance plans that cover personal losses.

Two-wheeler Insurance

Two-wheeler insurance is very similar to car insurance in terms of features and benefits. The only significant difference is that in this policy you get your two-wheeler insurance instead of a car.

Health Insurance

A health insurance plan is a must-have insurance product for any individual. Seeing the cost of illness and the persistent in inflation in it in the country, you would be robbing your future self if you do not have a health cover for you and your family. A single accident or a tumor in your family can wipe away all your savings and render you bankrupt. A health insurance plan acts as a financial backup to meet any medical contingency with confidence. Health insurance plans also have attractive tax benefits under section 80D of the Income Tax Act 1961.

To suit the needs of different people there are different types of health insurance plans available, such as:

  • Individual health Insurance
  • Family floater health Insurance
  • Group health Insurance
  • Senior citizen health Insurance
  • Women health Insurance
  • Critical-illness Insurance
  • Hospital daily cash

Car Insurance

Car insurance is a type of motor insurance. And like every motor insurance policy, it is mandatory to have as per law else you would be fined by the traffic police. Car insurance has two components, i.e. third party cover and owned damage cover. The third-party policy covers any liability accruing to a third-party due to accident by your car. You may go for only third-party cover to save the fines and penalties. However, if you want a financial cover for any theft or damage to your car then you should buy a comprehensive car insurance policy that covers both own-damage and third-party liabilities.

Home Insurance

Under a home insurance policy, the general insurance company promises to cover the financial damages caused to your home or its contents. It takes decades of savings to build a house and make it home but a single fire accident can burn everything to ashes. So, it is recommended that you have insurance of your house.

A home insurance policy covers your house against:

  • Man-made calamities such as theft, riots, fire, etc.
  • Natural calamities such as storm, earthquake, floods, storms, typhoon, tempest, etc.
  • There are three types of home insurance, such as:

  • Structure insurance: It covers the structure of your house.
  • Contents insurance: It covers the things and valuable items kept in your house.
  • Comprehensive home insurance policy: It covers both the structure and contents.

Travel Insurance

Travel insurance covers you for any contingency that you might face when travelling abroad. The most important coverage the travel insurance plans provide you is medical coverage. Your regular health insurance plans don’t cover you in abroad. So, if you need hospitalization in a foreign country, it would all be from out-of-pocket. And mind you, treatment abroad can be filthy expensive. Also, these plans cover you for medical evacuation and repatriation. Medical evacuation means that the patient would be flown to the nearest country where the required treatment is available. And repatriation means that the mortal remains of the deceased would be sent back home.

Hence, if you are planning a trip abroad then the first thing you should get is a travel insurance plan. It should be given as much priority as you give to your visa or boarding pass.

The other thinks that a travel insurance plan covers are:

  • Delay of checked-in baggage
  • Loss of checked-in baggage
  • personal accident
  • Loss of passport
  • Trip cancellation
  • Third-party liability
  • The types of travel insurance plans are as follows:

  • International travel insurance plans
  • Domestic travel insurance plans
  • Senior citizen travel insurance plans
  • Student travel insurance plans
  • Annual multi-trip policies
  • Single trip policies

Personal accident Insurance

A personal accident insurance compensates you or your nominee in the event of death, injury, mutilation, or impairment caused due an accident.

Mobile Insurance

This policy covers any financial loss due to theft or damage to your mobile. These days, high-end mobiles are quite expensive and there are many pick-pockets around. Hence, it is better that you take insurance for you mobile.

Cycle Insurance

Everything on which you spend your hard earned money matters. Some may laugh on the idea of getting insurance for your cycle. But then, how does that matter to you? There have been many cases of cycle theft as stealing a cycle is relatively very easy. These days, even cycles are quite expensive. So, you must get them insured.

Bite-size Insurance

These plans cover your specific needs for a shorter duration. These policies have a low premium and can be purchased online from any internet enabled devise. Some popular bite-size insurance plans are

Some popular bite-size insurance plans are:

  • Mobile screen insurance
  • Online fraud protection
  • Dengue insurance
  • Backpack insurance
  • Cab-ride insurance

For businesses houses, self-employed, and professionals, the following are the common types of general insurance policies that cover commercial losses.

  • Workman Compensation Policy

    It is taken by the businessmen to cover any liability towards the workmen or their family in case of death, injury, mutilation, or disability suffered by workers in the course of their employment. Accidents are common especially in case of factory workers. Machine operators can get injured if they are negligent or due to any other reason. If workers suffer such damages while rendering their services on the premises of the business owner, the owner is liable to compensate. Such liability is taken over by the general insurer under a workman compensation policy.

  • Standard Fire and Special Perils Insurance

    This policy provides financial protection against unforeseen contingencies such as accidental fire and allied perils as mentioned in the policy. The common allied perils are explosion/implosion, lightning, and destruction caused by aerial devices. Some policies also cover man-made perils such as strikes, riots, etc. and natural calamities like storm, tempest, typhoon, etc. The policy provides financial coverage for stock, plant and machinery, furniture and fixtures, and other contents.

  • Marine Insurance

    Marine insurance is one of the earliest forms of insurance. It covers damage to vessels, terminals, ships, cargo, and any transport by which goods are acquired, transferred, or held between the points of origin and their final destination. The name “marine” should not confuse you. Marine insurance is not limited to transfer of goods via sea or any other water body but it covers even airplanes, air-cargo, trucks, or any other means of commercial transport.

  • Fleet Insurance

    It is a group insurance policy that covers the whole fleet of trucks or other commercial vehicles.

  • Commercial Vehicle Insurance

    This policy covers an individual commercial vehicle and the features are very similar to that of the car insurance policy discussed earlier.

  • Group Health Insurance

    This type of health insurance plan is taken by the employer to cover all his/her employees under a single master policy. AN employee is cover under a group health insurance plan till he/she is working with the organization. Upon separation from the company, the policy benefits cease for that individual.

  • Professional Indemnity Policy

    This policy is very important for professionals like doctors, chartered accountants, lawyers, etc. Any negligence on part of these professionals can cause huge damages to their clients. A professional indemnity insurance cover pays the third party liabilities on behalf of the insured professionals in return for a premium.

  • Shoplifting Insurance

    This policy compensates for the financial loss due to theft in the policyholder’s shop.

  • Directors and Officers Insurance

    This general insurance policy is designed to protect the directors and officers of a company from professional liabilities.

  • Cyber Risk Insurance

    This policy protects a business from the financial losses accruing due to cyber frauds.

  • Contractor’s All Risk Cover Policy

    This is an engineering insurance policy and covers all the financial risks of a builder/contractor.

  • Machinery Breakdown Policy

    This policy compensates for the financial losses accruing due to the breakdown of plant and machinery.

  • Erection All Risk

    This policy covers the financial risks of a builder/contractor while erecting a building.

  • Plant All Risk Insurance

    This engineering insurance policy covers the plant and machinery such as cranes, drilling machines, etc. used in the project.

  • Electronic Equipment Policy

    This policy covers the financial risk caused due to breakdown of electronic equipment.

  • Boiler Pressure Plant Insurance Policy

    This policy covers the damages caused to boilers and pressure plants in a factory.

  • Advance Loss of Profit Insurance Policy

    This policy protects against loss of profits due to delays in construction and infrastructure projects.

  • Aviation Insurance

    This policy covers hull losses and liabilities to passengers as well.

  • Crop insurance

    This policy is helpful for farmers as they can get financial cover against any damage to their crops.

  • Livestock Insurance

    Similarly to crop insurance, this policy provides financial cover against any damage caused to the livestock of the farmers.

Major difference between general insurance and life insurance

General insurance, also known as non-life insurance, includes a wide range of insurance policies. In fact, all the insurance policies which are not life insurance are general insurance.

Unlike life insurance, general insurance policies are
contracts of indemnity.

Difference Between General Insurance and Life Insurance
Contract of indemnity

What is a contract of indemnity?

The dictionary meaning of the word indemnity is protection or security against a loss. In a contract of indemnity, one party promises to save the other party from the losses caused to the latter. General insurance is also a contract of indemnity because the insurance company pays to the insured only when the latter suffers any financial loss due to an insured event. For this service the general insurance company charges a payment called premium.

For example, if someone has taken theft insurance for his shop and loss happens due to fire, then the insured cannot claim the damages from the insurance company. If and only if, the loss happens due to theft in the shop the insurance company is liable to pay .

Since many life insurance plans pay at maturity of the policy and do not promise to indemnify the insured for any, life insurance is not a contract of indemnity. That is why the insured in a life insurance contract is called an assured and the sum insured is called sum assured.

Benefits of taking general insurance

There are many general insurance policies in India and each of them is designed for a specific purpose and covers specific risks. There are numerous reasons why you should be covered under the general insurance plans that suit your needs. Some common benefits of general insurance plans are listed below.

Loss compensation

It takes years of toil and perseverance to build an asset. But it takes seconds for it to be destroyed. General insurance plans compensate you for the financial loss suffered when anything bad happens with your insured asset. You can use the proceeds from the insurance company to replace or repair that asset.

Benefits of General insurance

Backbone of economy

Businesses are the backbone of any economy and risk is an inherent part of business. It is only because of general insurance that businessmen take daunting risks and generate employment and other economic activities in the region of their operation. From businesses comes the taxes, from businesses comes the employment, from businesses comes the goods and services that masses enjoy. Hence, general insurance is an inseparable part of economy.

Dealing with uncertainty

We live in a world where the ship which was famously advertised to be “unsinkable” sank in her very first voyage. Yes, it is Titanic, we are talking about. Hence, no matter how many safety measures you employ in your work but some unforeseen forces have an upper hand. And the famous adage “To err is human” also plays its part in causing financial losses. General insurance plans provide a financial shield against these contingencies.

Protects from third-party liabilities

This feature of general insurance plans is beneficial in your normal routine as well as professional life. Plans like third-party motor vehicle insurance, professional indemnity insurance, directors and officer’s liability insurance, and many other general insurance plans cover liabilities towards third parties. Any loss of life or property caused to any third party because of your negligence or mistake is covered by these general insurance plans. This feature of general insurance plans can save you from several law suits and obnoxious out-of-pocket payment as damages to third parties.

Run on lesser reserves

Those who are from accounting background can understand this point better. Don’t worry! People from non-accounting line can also fathom it with no difficulty. Businessmen take out some portion of the profits and keep them as reserves to meet future contingencies. When a business is adequately insured then same money can be invested in other lucrative avenues that can give higher returns. The premium paid for general insurance can be much lower than the opportunity cost of the money kept as reserves.

Protects you from poverty

A single contingency can blow up all your savings and even make you debt-ridden. It is said that an average Indian is just a hospitalization away from bankruptcy. So, if you are not adequately insured then you are exposed to a great risk of becoming poor. By saving upon insurance premiums you would be “Penny wise but pound foolish.”

Serves as collateral for taking loans

In many cases, insurance is mandatory for banks to sanction loans. Especially for businessmen, loans and grants can be availed only when their business is adequately insured. Banks do that to ensure safety of their money. The proceeds from the insurance company can be used to pay-off the bank loans in the case of losses caused due to some contingency.

Saves fines

Some general insurance plans such as Motor Insurance plans are mandatory to have. The government authorities impose fines and penalties if you fail to show policy documents of such mandatory insurance policies. Hence, you have no choice but to have at least those specific general insurance policies.

Saves taxes

The government gives tax benefits on the premium paid for some general insurance plans such as health insurance plans. You get tax rebate under section 80D of the Income Tax Act 1961.

Peace of mind

When you know that your expensive assets are insured you can have peace of mind. You’ll be confident that if anything goes wrong, you’ll have financial backing.

After knowing all these benefits of general insurance plans you must be motivated to get the required insurance done to protect your precious assets and save you from third-party liabilities. So, let’s talk about the documents required to buy general insurance policies.

Documents to be furnished for buying general insurance plans

It can be downloaded from the website of the insurer.

  • ⚬ Birth Certificate
  • ⚬ School or high school mark sheet
  • ⚬ Driving license
  • ⚬ Passport

  • ⚬ Passport
  • ⚬ Voter Id
  • ⚬ Driving license
  • ⚬ Pan Card

  • ⚬ Telephone bill
  • ⚬ Electicity bill
  • ⚬ Ration card
  • ⚬ Driving license

Photographs of insured asset and the insured event leading to the loss

It is the description of the insured asset

The details of these specific documents can be seen in claim form on the websites of the insurer

Now, let's move towards the most awaited question...

General Insurance

How to file claims under a general insurance plan?

The following are the common steps that you should follow to file general insurance claims. Note, there may be some additional steps specific to some general insurance plans.

Intimate the general insurer about the loss. You can do it via email or call on the official help number of insurance company.

Download the claim form from the website of the general insurance company. Fill it and attach with relevant documents and send to the insurer.

The general insurance company appoints a surveyor who visits and inspects the loss and sends his/her report to the general insurance company.

Based on the report sent by the surveyor, the insurance company accepts or rejects the claim.

If the claim is sanctioned by the insurer you accept the amount in your account or via cheque. The claim can be cashless or reimbursement.

In case of cashless claim, the general insurance company pays directly to the third party for example, the hospital in case of health insurance and car garage in case of car insurance. If the claim is to be settled as reimbursement, you pay it first from out-of-pocket and send all the bills to the insurer. Upon scrutinizing the bills, the insurance company reimburses you the amount you paid out-of-pocket.

In conclusion

General insurance plans empower you to live with fearlessness and devoid of tension. These plans are ultimate tools to manage and mitigate the several risks you are exposed to. No financial planning can be done keeping general insurance plans out. Not only useful for individuals, but at a macro level, general insurance acts as a pillar on which the whole economy stands. Hence, it would be gross foolishness on your part if you are not adequately insured.

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