General Insurance | Understanding
General Insurance Company.
A general insurance policy comprises a range of insurance plans other than life insurance products. The types of general insurance policies include motor insurance, health insurance, home insurance, marine insurance, travel insurance and so on.
The general insurance policy offers coverage to policyholders to compensate their damages or losses incurred from a specific incident. In simple terms, general insurance is insurance which is not life insurance.
The tenure of general insurance does not last for a lifetime, as happens under the life insurance policy, but it is scheduled for a particular incident or for a duration. The majority of general insurance products come with annual contracts, while some of them are also available as long term.
What is a General Insurance Company?
The basic concept of insurance is applicable to a group of people which may sustain the same risk in the same situations or region. The amount collected as the cost of the premium is known as a pool and whenever anyone, among the people who have paid the premium, faces damage or loss, the person is offered the compensation or claim from that collected amount of pool.
To understand its concept in a better way, let’s go through an example. Suppose 10 people are paying Rs. 1,000 every year to a company as the bike insurance premium. Now, there is a possibility of only 10% to 30% of getting bike damage claims from the insured persons in a single year. With this concept, the company will be having a fund of Rs. 10,000 out of which only 2 or 3 people will have to be paid.
If we consider that their damage expenses would be double their premium amount, even then, only Rs. 4,000 to Rs. 6,000 will be paid. In this manner, a general insurance policy functions as a savior.
Why Do I Need a General Insurance Company?
Only a few people can easily bear the damage costs arising out from an accident or mishap of their car. Therefore, the concept of general insurance is designed to help people in getting their car repaired without facing any financial crisis.
For example, you suddenly meet with an accident while driving your car and another car hits your car from behind, which leads to dislocation of the bumper and a huge dent on your car’s back. Now you need around Rs. 5,000 to fix the bumper and Rs. 1,000 for the repair of dent. In such a case, a car insurance policy plays a key role and the repair amount can be reimbursed under a comprehensive car insurance cover. In this way, a general insurance plan could fulfill your financial needs in case of car damage, etc., due to an accident, without investing from your pocket.
What Are the Types of General Insurance Policies?
There are different types of insurance plans available under the general insurance. Some of which are as follow:
1. Motor Insurance:
The motor insurance plans comprise all kinds of damages and losses incurred by a vehicle in on-road and off-road emergencies. Motor insurance consists of a third-party insurance policy and a comprehensive insurance policy which insures vehicles against the damages caused by natural calamities and man-made calamities.
The third-party insurance plan is the basic insurance policy ownership which is compulsory. It offers coverage for third parties for their bodily injuries or death in addition to the property damage due to an accident involving your vehicle.
The comprehensive insurance plan covers the expenses of third-party damages, which may be incurred by your vehicle. In addition to this, it gives compensation against your own damages or losses caused by an accident or any unfortunate incident.
Motor insurance is provided for two-wheeler insurance, car insurance, and commercial insurance. Some attractive benefits of motor insurance comprise roadside assistance, cashless garages, personal accident cover, and towing assistance.
2. Health Insurance:
A health insurance policy covers the healthcare and surgical costs of the insured person due to hospitalization from an illness or injury. Additional add-ons and riders are available with the health insurance plans which enhance the insurance benefits and scope of the insurance cover.
It is a way to mitigate financial risks which may arise at the time of a medical emergency. Keeping health insurance ensures the peace of mind at the time of crisis. Health insurance comprises cashless facilities at network hospitals, pre and post hospitalization costs, ambulance charges, daily cash allowance and so on.
A few types of health insurance plans include individual plan, family floater policy, surgery cover, comprehensive health insurance, maternity insurance and so on.
3. Travel Insurance:
International travel, either vacation travel or business travel, can turn into a bad experience if someone witnesses adverse incidents such as loss of passport, loss of baggage, flight delay, medical contingency, and so on. Such incidents take the fun away from traveling, but a travel insurance plan can compensate for the situation.
A travel insurance covers unseen medical and non-medical contingencies arising during overseas travel to ensure a worry-free travel experience. It safeguards the insured person against misfortunes during the travel. With travel insurance, the whole travel experience reaches another level. There are different types of travel insurance which include individual travel policy, family travel policy, student travel insurance, senior citizens travel policy and so on.
4. Home Insurance:
The home insurance shields the house, as well as its contents, depending on the scope of the insurance plan, opted for. It insures your home against man-made disasters, natural calamities and other related threats. It protects your home against risks and damages from fire, theft, burglary, flood, earthquakes, and so on, covering the physical assets and valuables in it. Home insurance assures your hard-earned savings are availed to meet crucial requirements instead of utilizing them for the reconstruction of your home in case of any harm applied to it.
5. Marine Insurance:
Many businesses are run with the import and export of goods, within national and international borders. Sometimes, this movement of goods can be affected with the risk of mishaps, which can result in damage or destruction of shipments leading to significant financial losses. Therefore, marine cargo insurance policy gives coverage to goods, freight, cargo, etc., against loss or damage during transit by rail, road, sea and/or air.
In addition to this, shipments are secured from the time the goods leave the seller’s warehouse until they reach the buyer’s warehouse. In short, this insurance offers complete financial protection during the transit of goods and compensates in the event of any loss suffered. Different types of marine insurance plans are open cover, annual policy, voyage policy and so on.
6. Rural Insurance:
Rural insurance are the solutions which are required to meet the needs of agriculture and rural businesses. IRDA has stipulated annual targets for insurance companies to provide insurance to the rural and social sectors.
7. Mobile Insurance:
The mobile insurance plan is designed to compensate for the repair of your mobile's screen damaged in a mishap or an accident. The mobile buyers can buy a mobile insurance plan for both new as well as old mobiles. The insurance plans are quite reasonable as compared to your costly mobile phones.
8. Bicycle Insurance:
Not just bikes, scooters or cars are costly, but nowadays people are using expensive bicycles as well. Just like cars and bikes, it is also not feasible to bear the repair expenses related to bicycle damage.
Hence, many insurance companies are now providing insurance cover for personal accidents, accidental damage, theft, and even hospitalization with a bicycle insurance plan.
9. Commercial Insurance:
Commercial insurance includes the insurance solutions for different industries that may arise out of business operations. It encompasses the insurance solutions for aviation, construction, automotive, chemicals, foods and beverages, oil and gas, pharmaceuticals, power, telecom, technology, textiles, transport, logistics, and so on. It gives coverage to small, medium, and large scale enterprises as well as multinational companies. Some common types of commercial insurance are engineering insurance, energy insurance, property insurance, and so on.
Claim Ratios of a General Insurance Company;
Every insurer shows its excellent features and offerings while selling an insurance policy. But its ability to settle claims which actually confirms its effectiveness could be judged by its claim ratios.
Being an insurance policy buyer, you need to look for 3 important factors at the time of purchase:
1. Claim Settlement Ratio – It is the number of insurance claims settled by the insurance company to the total number of insurance claims filed in a financial year.
2. Incurred Claim Ratio - The total amount spent on the settlement of claims to the total cost earned from the amount of premium by an insurance provider in a financial year.
3. Claim Settlement Turnaround Time - It is the duration between the claim filing and claim settlement. Basically, it is the time taken by the insurer to settle a claim.
Tax Benefits With General Insurance Policies;
When it comes to tax benefits under General Insurance, only health insurance plans come with tax benefits. According to section 80D of the Income Tax Act 1961, the amount of premium paid to avail a health insurance policy is eligible for tax deduction from your total amount of income. The highest limit for this deductible amount is Rs 15,000 and which could be expandable up to Rs 20,000, in case of senior citizens. Hence, if you make the premium payment for both for yourself as well as your parents, a maximum of Rs 35,000 shall be qualified for tax deduction from your total income.
Use this link for Frequently Asked Questions [FAQ’s] on General Insurance policies.
Terms and Conditions:
*Standard T&C Apply. For more details on risk factors, terms and conditions, please read the sales brochure of respective insurers carefully before concluding a sale. Tax benefits are subject to changes in applicable tax laws. For detailed communication on sales contact below authority.
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Insurance Advisory Club
IRDAI Licensed Agent
- Mr. Dheeraj Bodduna
Financial Advisor
Contact: 85220 66133
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