Insurance is an important part of financial planning, giving those who choose to wield it some form of protection against unforeseen events and allowing them peace of mind. In the UAE, having the right insurance is particularly vital due to the country’s unique lifestyle and economic environment. With a diverse population and a rapidly evolving economy, residents often need tailored insurance packages to suit their needs. However, for those seeking the right insurance package, it is important to understand the key differences between life insurance and general insurance. These two kinds of insurance are for different things and needs. In this blog, we’ll explain the main differences between life and general insurance to help you choose the right one.
What is Life Insurance?
Life insurance is an agreement between a person and an insurance company. The company promises to pay a certain amount of money to someone chosen by the policyholder if the insured person dies. The goal is to give financial help to the family or dependents of the person who has passed away.
It can be categorised into two forms.
- Term life insurance: This policy covers a specific period, like, 10, 20, or 30 years. If the insured person passes away during this period, the beneficiaries receive the death benefit. There is typically no payout if the term expires and the policyholder is still alive.
- Whole life insurance: This insurance lasts for the person’s whole life as long as they keep paying. Besides giving money when the person dies, it also builds up cash over time that can be taken out.
What is General Insurance?
General insurance refers to any insurance policy that is not life insurance. It covers a wide range of risks. With general insurance, you can avail protection against financial loss incurred due to events like accidents, theft, natural disasters, and medical emergencies. Thus, the primary goal of general insurance is to safeguard your assets and provide financial support during unforeseen circumstances.
Here are a few different policies that can be classified under general insurance:
- Health insurance: This pays for medical costs like hospital stays, surgeries, and medicine.
- Motor insurance: protects against damages to your vehicle or third-party liabilities in the event of an accident.
- Home insurance covers your home and its contents against risks like fire, theft, and natural disasters.
- Travel insurance: With travel insurance, you can avail protection against travel-related risks such as trip cancellations, lost luggage, and medical emergencies while abroad.
Life Insurance Vs General Insurance
Here are the key distinctions between the two:
| Category | Life insurance | General insurance |
| Purpose of coverage | Gives financial security to loved ones after the insured’s death. It is focused on the insured person’s life and well-being and does not include savings or investment components. | It protects assets and covers specific property, health, and liability risks. It does not have a savings or investment component. |
| Duration of coverage | Typically long-term, it can last for the entire life of the insured (whole life insurance) or a specific term (term life insurance). | Usually short-term, policies must be renewed annually or at the end of the specified coverage period. |
| Payouts | Provides a death benefit to beneficiaries upon the insured’s death. Some policies may offer cash value or maturity benefits. | Pays out for specific claims made within the coverage period (e.g., medical bills, repair costs). No payout if no claim is made. |
| Premiums | Generally higher due to the policy’s long-term nature and potential investment component. | Typically lower, reflecting the shorter-term nature and specific coverage of the policy. |
| Investment component | Certain types (e.g., whole life or endowment policies) include an investment or savings component that can grow over time. | Does not include an investment component; it focuses solely on risk protection. |
The takeaway:
That was all about the differences between life insurance and general insurance. So, better to be insured than not. However, in the UAE, insurance is not a one fits all size solution, and one needs to understand each category’s different elements to comprehend the objectives of each insurance model. When selecting insurance policies, you must assess your circumstances, financial goals, and the risks you want to protect against. Whether planning for your family’s future or safeguarding your home and health, the right insurance can provide peace of mind and financial stability.
