Life Insurance vs. General Insurance: What's the Difference?
By Janet White || Updated on November 28, 2023
Life insurance provides financial protection against the death of the insured, while general insurance covers losses from specific events like accidents or theft.
Key Differences
Life insurance is a policy that pays out a sum of money upon the death of the insured or after a set period. General insurance, alternatively, provides coverage for losses and damages to assets other than life, such as property, vehicles, and health.
The primary purpose of life insurance is to provide financial security to the beneficiaries of the insured. General insurance, on the other hand, aims to protect the insured from financial losses due to specific incidents like accidents, theft, or natural disasters.
Life insurance policies often include both a death benefit and an investment or savings component. General insurance policies, however, typically do not have an investment aspect and are renewed annually or for specific terms.
The coverage of life insurance extends over a longer duration, often several years or for a lifetime. In contrast, general insurance covers shorter periods, usually up to one year, and must be renewed.
Life insurance can be further categorized into term life, whole life, and universal life insurance. General insurance includes categories like health insurance, auto insurance, home insurance, and travel insurance.
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Comparison Chart
Coverage Focus
Life of the insured.
Non-life assets like property, vehicles, health.
Primary Purpose
Financial security for beneficiaries.
Protection against specific losses or damages.
Policy Components
Death benefit, often with savings component.
Typically lacks investment aspect.
Duration of Coverage
Long-term, often years or lifetime.
Short-term, usually annual or specific terms.
Policy Types
Includes term life, whole life, universal life.
Includes auto, health, home, and travel insurance.
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Life Insurance and General Insurance Definitions
Life Insurance
Provides peace of mind regarding the financial future of one’s family.
Buying life insurance gave him peace of mind about his family's financial security.
General Insurance
Includes health, property, and liability insurance.
Her health insurance, a type of general insurance, covered her medical expenses.
Life Insurance
Can be term, whole, or universal life policies.
She opted for term life insurance for its affordability and specific coverage period.
General Insurance
Offers protection against specific financial losses.
Their business’s general insurance protected against loss from theft and fire.
Life Insurance
Often includes a savings or investment component.
Their life insurance plan also served as a means for retirement savings.
General Insurance
Insurance covering assets other than life, such as cars or homes.
His general insurance policy covered damages to his car in the accident.
Life Insurance
Financial protection for beneficiaries in case of the policyholder’s death.
He purchased life insurance to ensure his children's future education expenses.
General Insurance
Usually renewed annually or for specific terms.
The company renewed its general insurance policy for its assets every year.
Life Insurance
A policy that pays a sum upon the insured's death.
Her life insurance policy provided financial support to her family after her demise.
General Insurance
Does not include a savings or investment component.
Their travel insurance, a form of general insurance, offered no investment benefits.
FAQs
Who benefits from a life insurance policy?
The beneficiaries designated by the policyholder.
What is life insurance?
It’s a policy that provides financial benefit upon the insured's death or after a set period.
What does general insurance typically cover?
It covers assets like vehicles, property, and health.
What are examples of general insurance?
Auto, home, health, and travel insurance are examples.
Can life insurance include savings?
Yes, some life insurance policies have savings or investment components.
What types of life insurance are there?
Term life, whole life, and universal life are common types.
Is life insurance mandatory?
No, it’s a personal choice based on financial planning needs.
How is the premium for life insurance determined?
Based on factors like age, health, and policy type.
What is general insurance?
Insurance covering losses and damages to non-life assets.
Do businesses need general insurance?
Yes, to protect against various operational risks.
Does general insurance cover natural disasters?
Many policies do, but coverage details vary.
Is general insurance a long-term contract?
No, it’s usually for short terms, often annually.
Does life insurance cover illness?
Some policies include critical illness coverage.
Can general insurance be customized?
Yes, policies can be tailored to specific needs and risks.
What’s the difference between actual cash value and replacement cost in general insurance?
Actual cash value considers depreciation, while replacement cost covers the current cost of similar new items.
Is general insurance affected by location?
Yes, factors like location can influence risk and premiums.
Can you borrow against a life insurance policy?
Yes, if the policy has a cash value component.
Are life insurance payouts taxable?
Generally, they are not taxable to the beneficiary.
How do deductibles work in general insurance?
Deductibles are amounts paid out of pocket before insurance coverage kicks in.
Can you change your life insurance beneficiary?
Yes, policyholders can usually change beneficiaries.
About Author
Written by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
