General vs Life Insurance Broker: Key Differences
In India, the Insurance Regulatory and Development Authority is the body authorised to issue insurance broker licenses under the IRDA Act, 1999. As the insurance sector is booming, these regulations help the government keep track of and supervise the insurance brokers. Insurance Brokers are entities who offer various types of insurance to consumers and assist them in selecting a plan which shall be suitable for them based on their needs. These brokers provide their clients with consultancy services, Risk management advisory and help them settle their claims, brokers extend these services on remuneration or payment of a fee. In this blog, we will discuss the differences between General vs Life Insurance Brokers.
Types of Insurance brokers
Insurance brokers can be subdivided into five categories theses are:
1. Direct Broker
1.1. Direct broker (Life) insurance
1.2. Direct Broker (General) insurance
1.3. Direct Broker (Life and General)
IRDAI issues licenses to direct brokers. These brokers later get acquainted with the needs of various clients and bring forth these requirements to an insurer. The direct broker also advises clients to pick up an appropriate policy after making a note of their needs. Direct brokers always act on their clients’ instructions, keep track of their insurance records and help them settle their claims. The minimum amount required for the registration of a direct broker company is Rs.75 Lakhs, and they are required to maintain a net worth of Rs.50 Lakh.
2. Reinsurance Broker
Reinsurance brokers are insurer’s insurers, i.e. they extend insurance to Direct insurance companies. These brokers require a minimum capital of Rs.4 crore, and they need to maintain a net worth that shall be 50% of the capital requirement.
3. Composite Broker
Composite brokers are a mix of both the entities- Direct brokers and Reinsurers. They play both roles. The minimum capital required by composite brokers is Rs. 5crore minimum, and they need to maintain a net worth of 50% of the minimum capital requirement.
Explanation General vs Life Insurance
Under the direct brokers, General insurance and Life insurance are two of the most prominent types of insurance in the sector. Still, people are not aware of the distinction between General vs Life Insurance. We shall first deal with each topic individually, then compare both.
- Life insurance
Life insurance, as the name suggests, is a policy which shall cover your life. Life insurance is useful as it secures the family of the nominee in case of his death. However, in some situations, they also act as an investment option. There are different types of Life Insurance. Some of them are enumerated below.
- Term life insurance: In this type of life insurance, the insured individual is covered for a pre-defined period. If an individual dies during this period, his family members can claim insurance money.
- Complete Life Insurance: A completed life insurance is not limited to a fixed tenure or a definitive period. It is valid till the entirety of the policyholder’s life. The claim for this plan can only be made after the policyholder passes away. The nominees cannot claim the amount under this head as long as the policyholder is alive.
- Unit Linked Insurance Plans: This is a Hybrid policy wherein half of the premium paid by the policyholder is utilised for insurance cover, and the rest is invested in the securities market. Such policies get you the best of both worlds as they will help you make a significant investment and provide you with the benefits of life insurance as well.
- Endowment plans: Endowment plans are also insurance cover plus an investment tool. Under this plan, a part of the premium is utilised to give the policyholder the sum assured, whereas the rest of the amount is invested. In case the insured individual outlives the term mentioned in the policy then he shall receive both the sum assured and the investment bonus. On the other hand, if the person dies prior to the date of maturity, then he shall be given the sum assured only.
- Money Back: In a money-back plan, the policyholder will receive returns at a fixed time interval, and the beneficiary does not have to wait for the policy to mature. For example, an individual under the money-back guarantee shall receive benefits from 5 years, 10 years, 15 years post the date of purchase, but this can vary from policy to policy.
- General Insurance
Let’s move on to the next aspect of our discussion on General vs Life Insurance Broker. Unlike Life insurance, general insurance extends cover to other aspects of a person’s life. It covers things such as health, travel, insures property against theft, accidents, disasters, etc. General insurance helps minimise the risks that might happen to a person’s physical assets and well-being. Different types of General insurance are listed below:
- Health Insurance: due to stressful lives and improper nutrition, many people are susceptible to various ailments. Along with this, the rising medical and hospitalisation expenses have made it essential for an individual to have a health insurance plan. A plethora of health insurance are available in the market, which covers not only the individual but also their families.
- Home Insurance: Home insurance secures a policy holder’s home against damages that can be caused due to natural calamities like fires, floods, earthquakes etc. it also extends to acts such as theft and riots also, in which the house or the assets inside it can get damaged.
- Motor Insurance: Motor Insurance helps to safeguard a person’s vehicle against accidental damages, theft, terrorist attacks, riots or natural calamities. The Motor vehicle act has stated that a third-party insurance is a bare minimum that person needs to have before operating a vehicle.
Understanding the differences- General vs Life Insurance Broker
The following table shows the distinction between General vs Life Insurance Broker
|Basis||Life Insurance||General Insurance|
|Meaning||It only deals with the life of a person and the risks forborne with it.||It deals with aspects such as physical well-being and other assets of the insured|
|Category||Life insurance is treated as a future investment.||General insurance is a contract of indemnity, here the insurance company saves the other party on account of loss borne by him|
|Duration||Life insurances are long term such as 10 years, 15 years, etc.||General insurances are considerably for a shorter period of time, usually for 1- 3 years.|
|Payment||The premium is paid in installments||Premium is paid in a lump sum- at one go.|
|Claims||The insurance amount is received whether on maturity or on the happening of an event which in this case is the death of the policyholder.||Under general insurance, the company shall either reimburse the loss or repay the liability in case of mishaps.|
|Insured (person/property)||The insured must be present at the time contract is being entered into.||The property must be present at the time of contract and after the loss as well.|
|Value of the policy.||The value depends on the policy that an individual has opted for.||The amount received is equal to or proportionate to the loss incurred.|
The major difference between General vs Life Insurance Broker is that the Life insurance only deals with the aspect of the life of a human being, whereas General Insurance covers a wider spectrum in which facets such as physical properties such as cars, homes etc. along with an individual’s health are things that are insured.