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What is General Insurance | Types of General Insurance

Last Update Date : April 27, 2019
Estimated Read Time: 7 min

Life is all about unexpected events and no one can predict what will happen at the next moment.

General Insurance helps us to protect ourselves and the things we value the most such as our homes, our cars and our valuables from the financial impact of risks. The risk to our valuables can be from anything like from fire, flood, storm and earthquake, theft, car accidents, travel mishaps. The risk is also involved in costs of legal action against us. We can minimize this risk by taking appropriate and right kind of policy with the features we need.

In general, insurance works by spreading the cost of unexpected risks among a large number of people in the same region who share similar risks.

what is general insurance

What is General Insurance?

This category of insurance covers all forms of insurance except life. General insurance Covers insurance of property against fire, burglary, theft, personal insurance covering health, travel and accidents and liability insurance coving legal liabilities. Other covers may include insurance against errors and omission for professionals, credit insurance etc. Common forms of general insurance are motor, fire, home, marine, health, travel, accident and other miscellaneous forms of non-life insurance.

Unlike life insurance policies, the tenure of general insurance policies is normally not that of a lifetime. The usual term lasts for the duration of a particular economic activity or for a given period of time. Most general insurance products are annual contracts. There are, however, a few products which have a long term.

When you take out an insurance policy, you pay a monthly or annual premium. That money joins the premiums of many thousands of other policyholders and goes into a big pool of funds. When an unexpected event occurs or takes place, that pool of funds can be used to help you up to the limit you have selected in your policy.

If things go wrong, your insurer may either repair or replace the items that have been lost or damaged, depending on the terms of your policy. You may also have the choice of receiving a cash settlement for the amount of money agreed in your policy.

Types of General Insurance

There are a lot of types of general insurance that can be used by you for different purposes.

Motor Insurance

Motor insurance includes car insurance and two-wheeler insurance, covers all damages and liability to the vehicle. Moreover, according to the Motor Vehicles Act, 1988, driving a motor vehicle without insurance in a public place is a punishable offence.

A motor vehicle can be covered either by a Liability Only policy which is a statutory requirement and covers the legal liability for injury, death, and/or property damage caused to a third party in the event of an accident caused by or arising out of the use of the vehicle, or a package policy which includes the Liability Only policy and covers the damage to owner’s vehicle, usually called Third Party Insurance.

The common motor insurance plans include

Car insuranceA comprehensive coverage against physical damage and bodily injury to the car and also covers against third-party liability.
Two-wheeler insuranceA comprehensive two-wheeler insurance policy provides hassle-free protection to your bike or scooter against physical damage, theft and third-party liability.
Commercial vehicle insuranceCommercial vehicle insurance is a Liability Only policy for commercial vehicles across the various classes of vehicles like goods carrying vehicles – private and public carrier, passenger carrying vehicles, miscellaneous and special types of vehicles.

Health Insurance

Ill health can result in a major halt in your life and work. Moreover, the health care cost is so increasing that you will be spending a huge amount of money to bear costs. This is the reason why you would need health insurance to cover your medical expenses following hospitalization from sudden illnesses or expenses caused by accidents. This also includes a cashless facility in empanelled hospitals, pre-hospitalisation and post-hospitalisation expenses and ambulance charges. Here are some of the common types of health insurance policies:

IndividualA health insurance policy provides cover for an individual with cashless hospitalization and other features. In case you feel that the sum insured of your existing health insurance plan does not suffice for expenses due to illness or accidents then opt for a cover such as the Extra Care health insurance policy to extend your health insurance.
Family Floater PolicyA policy covers family members under a single plan. The fixed sum insured can be availed by an individual member or as a sum total for treatment of one person.
Surgery CoverA Surgical Protection Plan provides a fixed benefit amount for specified surgeries and helps you to take care of the expensive medical treatment in a hospital. This benefit plan that is used for the surgical treatment of serious illnesses such as cancer, kidney failure and heart attack can be availed as a standalone plan or a rider.
Comprehensive Health InsuranceA high-value comprehensive health insurance policy with a wide range of sum insured, add-on covers, special benefit covers such as maternity benefits and dental treatments, fulfils all the healthcare needs and ensures complete peace of mind, regardless of the situation of life you are in.
Other types of health insurance
  • Personal Accident
  • Hospital Daily Cash Allowance
  • Critical Illness

Travel Insurance

Travelling includes various kinds of risk other than medical eventualities such as loss of baggage, trip delay and other incidental expenses. Travel insurance covers the insured against these misfortunes while travelling.

The different travel insurance policies include

  • Individual travel policy
  • Family travel policy
  • Senior citizens travel policy
  • Student travel insurance
  • Corporate travel policy
  • Comprehensive policy

Home Insurance

Your home is one of the largest financial investments that you have made. It needs to be safeguarded from unforeseen events. Along with your home, property insurance also protects the valuables and other assets that are the interest of the insured.

Rural Insurance

Rural insurance generally refers to insurance related to rural people, their business (farming, cattle, poultry, etc.) and their families.
Insurance solutions to meet the needs of agriculture and rural businesses form part of rural insurance. IRDA has stipulated annual targets for insurers to provide insurance to the rural and social sector.

Rural policies comprise the insurance of

  • Various livestock e.g. cattle, sheep, goat, etc.
  • Sub-animals e.g. silkworm and honeybee
  • Plantation and horticultural crops e.g. rubber, grapes, etc.
  • Property e.g. agricultural pump sets, etc.
  • Persons e.g. Gramin accidents

Commercial Insurance

Commercial Insurance encompasses solutions for all sectors of the industry arising out of business operations. Insurance solutions for automotive, aviation, construction, foods and beverages, manufacturing, oil and gas, pharmaceuticals, power, technology, telecom, textile, transport and logistics sectors. It covers small and medium scale enterprises, large corporations as well as MNCs.

Common types of Commercial Insurance

Type of Commercial InsuranceDescription
Property InsuranceIt covers the financial cost of any loss of structure/property or its content in the event of theft or damage.
Marine InsuranceIt covers the loss or damage to cargo, ships and any other transport by which the property is transferred or held between the points of origin and destination.
Liability InsuranceIt ensures the individuals and businesses for the risk of damaging somebody’s property or injure someone by negligence.
Engineering InsuranceIt covers the risks faced by ongoing construction project (maybe a building or factory or plant), installation project, machines and equipment in project operation.
Energy InsuranceIt covers the loss/risk of energy providing company/organization whether it is oil and gas, power and utility, or alternative energy.
International Insurance SolutionsIt is a cross-border regional insurance intermediary which provides a one-stop solution to its clients for a varied range of insurance to mitigate or reduce their risks.

Factors to be Considered for Purchasing Policy

Every insurance company presents its best face while selling a plan but it is the claim settlement that really decides how good the company is. As a buyer of policy, following factors should be considered while making the decision for buying a policy.

Sr. No.FactorsParticulars
1.Claim settlement RatioThe number of claims settled by the company to the total number of claims filed in a financial year.
2.Incurred claim ratioThe total amount spent on claims to the total amount earned as a premium by an insurance company in a financial year.
3.Claim settlement turnaround timeIt signifies the time span between the filing of a claim and settling a claim. It is the time taken by the insurance company to settle a claim.

[ Read: Best Insurance Policies to Save Tax ]

Tax benefits of General Insurance

Out of all kinds of general insurance, health insurance has the tax benefits for individual insurers. As per section 80D of Income Tax Act, 1961, the insurance premium paid on health insurance plan is a qualified deduction and can be claimed against the taxable income of a person provided premium must be paid during a financial year.

Maximum amount allowable as deduction u/s 80D is Rs 25,000 and is extensible up to INR 30,000 for a senior citizen. The deduction for senior citizen has been increased from Rs 30,000 to Rs 50,000 from the financial year 2018-19 as announced in Budget 2018.

Hence, if a person pays insurance for both himself and parents who are a senior citizen, he can claim deduction up to Rs 75,000 in a financial year.

For persons carrying on business or profession can claim premium paid for general insurance during the year as expense u/s 28 only if insurance is directly / indirectly related to their business / profession and not a kind of personal expenditure.

Getting insurance policies is a wise step towards saving or protecting your valuables in this world full of accidents. If you have any queries regarding the same you can get them resolved in our Tax Forum.

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Chetan Chandak (B.Com, LLB)
Chetan is the Head of Tax Research at H&R Block (India) with an experience of more than a decade in tax advising. He is also a regular contributor for some of the leading news publications in India such as Economic Times, Financial Express and Money Control. Professionally, Chetan is fascinated by international taxation and expat-related tax research.

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