Any insurance other than life insurance is called general insurance.
There are certain principles that guide any insurance contract, the principle of indemnity being one of them. This principle dictates that the insured should not profit from the insurance claim, meaning the insurance contract is expected to compensate for the loss incurred by the insured, either less or equal to it.
This is why general insurance and life insurance companies are usually different.
All insurance policies, be it health, marine, fire, etc. follow this principle in covering and disbursing the claims. However, life insurance is entirely different. Life insurance contracts do not follow this principle as it is not possible to accurately determine a person’s economic value (value lost by his nominee or the insured) at the time of his/her death.
Hence, all types of insurance, including property, motor, car, accident, health, marine, errors and omissions insurance, except for life insurance, fall under the category of general insurance.
A Case of General Insurance
Mr. Ram Nath started a new business of manufacturing paper. For that purpose, he invested a good amount of capital in setting up the business. He bought a new factory, machinery, trucks for transportation purpose, and hired around 45 workers. Mr. Ram was a financially proactive person and decided to buy insurance to cover as many risks as possible.
His insurance advisor has advised him to consider the following plans:
- Factory & Warehouse Insurance: To cover all the risk related the factory premises and its content for the damages caused due to fire, flood, theft, or leakage. While some major machinery comes with built-in insurance cover, other minor machines and tools will be protected under the policy.
- Motor Fleet Insurance: It provides coverage for the trucks and other vehicles, under one comprehensive policy.
- Group Health Insurance: Health insurance will provide sufficient medical coverage to the workers. In case of any medical emergency, the group plan will take care of all hospitalization and medical expenses.
- Workmen Compensation Insurance: Paper business needs a lot of contract workers to employed at the business premises, and since that makes his business liable to pay for any harm to such workers, this policy will protect him from any such liability.
For the later stage once the production starts Ram will also be using marine transit insurance to safeguard his cargo. For now, his advisor has also advised him to get a term plan for himself, so as to safeguard against any business liability if anything happens to him and create an estate plan as well, to transfer the ownership smoothly.
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