Any insurance other than the life insurance is called as general insurance.
There are certain principles that guide any insurance contract, the principle of indemnity being one of them. This principle states that the insured should not profit out of the insurance claim, i.e. insurance contract is supposed to return less than or equal to the loss suffered by the insured.
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.
Thus, all the insurance whether for the property, motor, car, accident, health, marine, error and omission insurance, etc. except for the life insurance will be called 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 his 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 of the major machinery come with inbuilt insurance cover, other minor machine and tools will be protected under this 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 the case of any medical emergency, all the hospitalization and medical expenses shall be taken care by the group plan.
- 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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