What is the meaning of Non-Life Insurance?

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What is the meaning of Non-Life Insurance?

Non-Life Insurance is nothing but another name for General Insurance. It works as a shield for protection against various risks and losses. Through Non-Life Insurance, individuals can protect their valuable assets. If the insured assets are damaged, the insurance company compensates the insurance policyholders.In this article, we will discuss what Non-Life Insurance is, its main features and types.

Definition of Non-Life Insurance

General Insurance, commonly known as Non-Life Insurance, is a type of an indemnity contract wherein the insurance company provides financial protection to the individuals against losses and damages to their assets. These losses and damages can be caused due to various incidents such as accidents, diseases, fire, flood, natural or man-made mishaps, etc. Non-Life Insurance can be simply described as any insurance which is not considered a life insurance.

Non-Life Insurance policies are designed to mitigate the financial losses and provide a sense of security during uncertain times. These policies are regulated by the Insurance Regulatory and Development Authority of India (IRDAI). IRDAI’s objective is to ensure fair practices and consumer protection in the insurance industry of India. It is also responsible for providing IRDA License to the insurance companies. Without this license, a company cannot sell insurance policies.

Main Features of Non-Life or General Insurance

Many people require clarification on the difference between life and non-life insurance. The major difference lies in the fact that the former covers life, while the latter does not. Here are the main features of non-life insurance which differentiate it from life insurance.

• Non-life insurance is in no way a savings plan which guarantees assured returns.
• It covers non-life assets only.
• Generally, the non-life insurance is an annual contract between you and the insurance company wherein you agree to pay the premium for 1 year. However, you can opt for a longer duration-contract, such as for 2 or 3 years.
• In case of an insured event like burglary, theft, accident or fire, the insurance pays the compensation for the damaged asset. 

The Necessity of having a Non-Life Insurance Policy

Let’s understand why having a non-life insurance policy is necessary through an example: Suppose you’re driving back to your house after a long and stressful day at work and suddenly your car gets hit by another car from behind. Due to this, your car’s bumper comes out and gets dented. Now you would require about Rs. 10,000 to get your car repaired. However, if you have vehicle insurance, the amount paid for the car repair would be reimbursed by the insurance company. Hence, a non-life insurance policy for a car would fulfill your requirement of financial assistance in case of car damage caused by an accident.

Major Types of Non-Life Insurance

In India, the following are the major types of non-life insurance:

Motor Insurance

Motor Insurance, also known as Vehicle Insurance, is a life of a non-life insurance which covers the losses and expenses related to two-wheeler or four-wheeler. 

The Motor Insurance is generally of the following types:

Third-Party Liability Cover

Third-Party Liability Cover is a type of insurance that covers liabilities which one may incur towards third parties on account of their vehicle. In other words, if you have to compensate a vehicle owner due to an accident caused by your vehicle, your third-party vehicle insurance will take care of it.

Own Damage Cover

This kind of insurance covers the costs for getting your own vehicle repaired after an accident or a natural disaster. This insurance ensures that any damages caused to your vehicle gets fixed without being heavy on your wallet.

Comprehensive Cover

This kind of insurance offers protection against financial liabilities incurred towards third parties as well as your personal vehicle. A third-party cover is mandated by law. However, comprehensive cover insurance offers more benefits.

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Home Insurance

As the name suggests, home insurance covers financial expenses or losses incurred due to emergencies which involve your home. These emergencies include property damage due to fire, flood, earthquake, burglary, theft and so on.

Travel Insurance

Whenever you travel, travel insurance offers financial protection when it comes to your health. This kind of non-life insurance is useful in case of contingencies like falling sick during a vacation or business trip.

Health Insurance

Health insurance is regarded as the type of non-life insurance that provides immediate financial assistance when any medical emergency arises. Accidents, hospitalization, pre-hospitalization expenses and post-hospitalization costs are some contingencies and expenses that are commonly covered under the health insurance. In addition to this, the health insurance may also cover the surgery and treatment’s cost for certain specified illnesses.

Tax Benefits on Non-Life Insurance

Out of all the forms of non-life insurance, only health insurance offers tax benefits. According to Section 80D of the Income Tax Act, 1961, the premium paid for a health insurance plan is eligible for tax deduction from an individual’s total income. Individuals can claim a maximum deduction of Rs. 25,000 every financial year under Section 80D. For senior citizens, the exemption limit is set at Rs. 50,000. It is important to note that the tax benefit is subject to changes in tax laws. 

Conclusion

Any individual that owns valuable assets must understand what non-life insurance is. Non-life insurance provides financial protection for your assets such as car and home during uncertain times. The type of non-life insurance that you plan to opt for must align with the assets owned by you. For this, an IRDA-licensed Insurance Agent that works for an insurance company can be really helpful! Such an individual can provide you an in-depth knowledge regarding various insurance policies offered by the insurance company he works for. If you need assistance in obtaining an insurance license for your company, you can connect with Registrationwala.

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