What is 'Insurance'

Insurance is a contract, represented by a policy, in which an individual or entity receives financial

protection or reimbursement against losses from an insurance company. The company pools clients'
risks to make payments more affordable for the insured.

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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

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What is the difference between Life and Non-life insurance?

It is very important to know the difference between Life and Non-Life insurance as one should know
which field they want to get in and choose their career accordingly. First, we will talk about Life
Insurance. Life insurance is an insurance cover that gives out a certain amount to the insured or their
nominated beneficiaries upon a certain event such as death of the individual who is insured. For our
convenience and better understanding it won’t be wrong to state that Life Insurance is related to a
human life. It’s basically a long term investment and requires periodic payments, either monthly or
quarterly or annually. The risks that are covered by Life Insurance include – premature death, income
during retirement, illness. The main products for the same consists of – whole life, endowment, term,
medical and health, life annuity plan.
Now, we move on to Non-Life Insurance which is covers things apart from the things covered in Life
Insurance. It is basically an insurance policy to protect an individual against losses and damages other
than those covered by Life insurance. The coverage period for most non-life insurance policies and
plans is usually one year, whereby premiums are normally paid on a one time basis. The risks that are
covered by non-life insurance is property loss (stolen car or burnt house), liability arising from damage
caused by an individual to a third party, accidental death or injury. The main products of non-life
insurance includes – motor insurance, fire/house owners/householders insurance, personal accident
insurance, medical and health insurance and travel insurance.

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Non-life insurance

Non-life or property and casualty insurance means insurance given against a physical or economic
damage.

Typical property and casualty policies comprise fire, water damage and theft insurance for buildings and
movable property, which are sold as a combination home insurance and property insurance.

Home and property insurance often also includes liability insurance and legal expenses insurance.
Liability insurance compensates for damage caused to another person or corporation in accordance
with the Tort Liability Act. Legal expenses insurance compensates expenses incurred in legal
proceedings.

Also, the mandatory traffic insurance for traffic accidents (third party) as well as the so-called 'casco', or
vehicle insurance for damage caused to one’s own vehicle (comprehensive) are examples of property
and casualty insurance.

Property and casualty insurance also includes sickness insurance and voluntary accident insurance
granted by a non-life insurance company, which pay various expenses, daily allowances or one-off
compensations due to sickness or accident of the insured person.

Property and casualty insurance companies also provide mandatory statutory accident insurance
policies paying compensations to employees suffering damage at work or work-related circumstances
(for example on business trips). Entrepreneurs can also insure themselves with statutory accident
insurance.
(http://www.finanssivalvonta.fi/en/Financial_customer/Financial_products/Insurance/Non-
life/Pages/Default.aspx)

Life Insurance:
Life Insurance is the protection against the loss of income that would result if the insured dies. In the
event of a death, the named beneficiary or beneficiaries will have access to compensation. Generally,
the beneficiaries are the families of the insured, however, they can also be partners or creditors.

With a life insurance policy, you can help your family to:

Continue to pay the mortgage on a house / property

Ensure the economic stability of your children and/or spouse
Maintain the family's current living standards
Pay debts and expenses
Create a fund for education - college/university
Property and Casualty Insurance (PC):
This type of insurance aims to protect the property, either real or personal, described in the policy
against certain risks. As you can imagine, there are different needs for the protection of:

Homeowner's Insurance
Liability Insurance
Aviation
Energy
Transportation
Marine
Various risks: construction, electronics and machinery breakdown, etc.
Similar to property insurance, casualty insurance protects against loss and/or damage of property. The
difference between the two is that casualty insurance protects your business premises from injuries and
crimes against it and property insurance covers losses to your land, building and/or belongings. For full
protection against both, people will often find these two types of policies combined.

So what are the main differences between P&C and LIFE Insurance?

Five differences between P&C and Life Insurance

Life insurance essentially insures human life, while P&C insurance insures people’s property (real or
personal).

Life insurance covers a certain risk, which is the death of the insured. P&C covers various risks and
uncertain events that may cause damage to someone’s property.

Life insurance is not renewed annually and expires only with the death of the insured or in the case of a
lapse (in most cases). In contrast, P&C is regularly renewed either annually, semi-annually, monthly
depending on the type of insurance and the renewal terms as agreed upon in the policy. For example,
with an Inland Marine Policy, insured property will be covered from the beginning of transportation to
the arrival of the destination.

In life insurance, the beneficiary/beneficiaries receive the payable benefit due to the death of the
insured. Once this transaction occurs, the policy is terminated. Conversely, P&C can have multiple
compensations (claims processed) and the policy may continue in force or be terminated with the
payment to the insured. For example, on an insured property the insurance policy can have two different
events such as theft and flood due to rainfall and they would both be covered.

Lastly, in life insurance there is no subrogation, “defined as the right for an insurer to pursue a third
party that caused an insurance loss to the insured”, however, in P&C it is present.
Note: Subrogation is done in order to recover the amount of the claim paid to the insured as a result of
the damage.

Why is it important to know the difference

between Life and P&C (Non-Life) insurance?
Firstly, so that you can be positive you’re choosing the right policy for your need. You will have a better
understanding of the risks covered by both insurance policies and an ideal grasp of when these policies
expire. Also, you will learn when the payable benefit is due, who receives it, and the advantages to
owning these types of insurance.

These are all critical concepts that should be taken into consideration when learning about P&C and Life
insurance. It is important to remember that Life Insurance helps the named beneficiaries to take care of
the financial crisis that may arise from the sudden death and/or sudden stop in income of the recently
deceased insured.

Whereas in the case of the Non-Life or P&C Insurance, if the property or the insured item is destroyed,
the insurance would cover for the financial loss to put the insured back in the condition he/she was in
before the loss.

These are key factors that separate Life insurance from Property and Casualty protection.

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