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Difference Between Life And Non Life Insurance

Monday, February 16, 2015
By Manoj Aswani

Manoj Aswani is VP at

I have been hearing stories from people that all private insurance companies are not safe for investment. Please clarify whether I should purchase a Plan from a private Insurance Company or from LIC only. I am very worried about this. You can always purchase a plan from Life Insurance Corporation of India, likewise you can purchase from any other private insurance companies also.
Sandesh Kalekar, Goregaon

There is absolutely no reason to doubt any private insurance company. They are all regulated by the same body – IRDA that regulates LIC and other public sector companies. Moreover, as per law, there is a solvency margin of Rs 150 crores that needs to be submitted to the RBI under IRDA, the Insurance Regulatory and Development Authority, as safety deposit money which is kept for repayment to customers in case the company declares bankruptcy.

Also, each Insurance company is attached with a Re-Insurance company who takes up the liability of repayment to customers in case of a claim if the Insurer is unable to pay. Considering the above 2 factors, you can completely trust all private insurers in India who are under a strict regulation of the IRDA. Hence purchasing any policy from any of the private insurers do not involve in any risks. So, please choose a plan according to your requirement irrespective of which insurance company you are purchasing it from as all are under the strict vigilance of the IRDA.

What is the difference between Life Insurance and Non Life Insurance?
—Puneet Singh, Chembur

Insurance means compensation of Financial Loss. Every asset has a value and it provides for some benefit to the owner. The benefit may be income or in some other form. So if the asset is destroyed, there would be some financial loss to the owner. To protect this financial loss, insurance is done.

Broadly, there are 2 types of Insurance:
1. Life Insurance
2. Non-Life Insurance (also called General insurance)

Life Insurance is a policy that people buy from Insurance Company, which can be the basis of protection and financial stability of the family after his death. Basically, Life Insurance is a Protection Tool for the earning member of a family. That is, if anything happens to that person, and his earning stops, then the family should not suffer from financial crisis. Life Insurance is an Insurance of a person’s life. So, if he were to die, his family would receive an amount of money called the Sum Assured, which would help the family to take care of the financial crisis which had arisen from the sudden stop in income. To get this benefit, he would have to pay a certain amount of money called Life Insurance Premium to the Insurance Company every year as per the contract.

Non Life insurance is all other forms of insurance namely Health or mediclaim, where death benefit is not covered, motor insurance, travel insurance theft insurance, home insurance, etc. For example: Motor Insurance means insuring the financial risk involved while operating the car. The car might meet with any damages, accident or may be lost or stolen. In such a situation the losses borne by the owner may be compensated by the Insurance Company if the same is covered under Motor Insurance Policy. Thus all other forms of insurance fall under the Non-life or general insurance category

(The author is Vice President at, insurance comparison website in India. You may write to him at
[email protected]).

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