Page 128 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 8: Insurance Sector

8.5 General Insurance Notes

General Insurance is a legal agreement entered between Insured and Insurer due to which due to
the consideration, the Insurer agrees to indemnify the Insured, for the loss or damage or liability
created due an accident which is covered under the policy subject to the terms and conditions of
the contract.
8.5.1 Advantages

Any insurance relieves policy holders from the financial burden in the event the risk covered
materializes. This is a very important advantage of holding an insurance policy. It helps one
cope with hard times and secures the financial state of an individual at all times.
Some of the benefits of holding a General Insurance Policy are as under-
Medical and Health insurance — take care of your medical bills if you need to undergo any
medical treatment.
Accident Insurance — takes care of expenses incurred in relation to an accident. For example,
compensation to be paid to aggrieved party in case you are the defaulting party, medical bills,
cost of repairs etc.
Motor vehicle/ Auto insurance — takes care of the cost of repairs to your motor vehicle in case
of an accident. Optionally, it also takes care of compensation for damage occurring due to the
fault of any other party. Most insurance policies also provide a cover against theft or damage to
the motor vehicle. Insurance cover is also available for two/ three wheelers.
Travel Insurance — takes care of expenses incurred due to any unforeseen event during travel.
Pet insurance — as the name suggests it takes care of certain expenses incurred for your pets. For
example, if your pet is ill and you need to spend money at the vet, the insurance company takes
care of payments.
Home Insurance — it covers expenses incurred in the event of robbery or damage to property in
case of fire, earthquake etc. Mortgage insurance is a variant of home insurance that takes care of
loan or mortgage payments in the event of a contingency.

Unemployment Insurance — this type of insurance keeps one financially secure in the event of
loss of employment.
Personal liability Insurance — this kind of insurance is relatively new in the insurance sector. It
takes care of any liability arising while conducting one's profession. Doctors, lawyers and other
professionals at risk of being sued by their clients may find this insurance very beneficial.

8.5.2 Types

Also known as non-life insurance, general insurance is normally meant for a short-term period
of twelve months or less. Recently, longer-term insurance agreements have made an entry into
the business of general insurance but their term does not exceed five years. General insurance
can be classified as follows:
Fire Insurance: Fire insurance provides protection against damage to property caused by accidents
due to fire, lightening or explosion, whereby the explosion is caused by boilers not being used
for industrial purposes. Fire insurance also includes damage caused due to other perils like
storm, tempest or flood, burst pipes, earthquake, aircraft, riot, civil commotion, malicious
damage, explosion, etc.

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