In general insurance policy, the insurance company pays to the insured person for the financial losses that occurred due to some unpredicted and undesired event like accident, illness, theft of personal belongings, natural disaster etc.
Based on today’s classification, the types of general insurance policies are increasing day by day. There are many policies which you might not have heard before.
However, there are two main categories of general insurance: first party insurance and third party insurance.
First Party Insurance
First Party Insurance is what the insured person does for himself. In first party insurance, the compensation provided by the insurance company against the claimed losses is achieved by the insured person.
There are many subcategories of first party insurance available in market which includes:
Health insurance include package of different kinds of insurance related to health. One of major part of health insurance is medical insurance. In this type of insurance policy, the insurance company pays for the medical expenses of policy holder due to some kind of illness. Another subcategory of health insurance is dental insurance and is related to dental problems.
Property insurance helps policy holder against losses to property due to undesired events such as theft, fire, burglary or natural calamities like earthquake, flood etc. It covers properties like home, machinery, valuable goods and many more.
Auto insurance covers the financial loss due to accident of a vehicle. Sometimes the medical expenses due to injuries are also covered under this policy. For vehicle owners, third party insurance is compulsory.
Travel insurance includes financial losses causes while travelling. Depending on the policy, it may cover lost luggage, theft of personal belongings, delays in travel, for example, due to delayed flight etc.
Credit insurance pays loans of the policy holder or money borrowed from other sources in case of inability to pay back again. Most common reasons of such inabilities are job loss, accident or death of policy holder.
Note: Insurance companies does not pay all the expenses related to the event that raises the claim. For the list of the expenses that insured must pay, click List of Non-Payable Expenses.
Apart from above mentioned types of insurance policies, there are a lot more types (and the list keeps on increasing) which provide benefits to the insured in different and unique ways.
Third Party Insurance
Third Party insurance covers the damages caused by you to others if he/she is legally held liable for injuries. The first party is the insured person, second party is the insurer i.e. the insurance company and the third party is the injured person who claims damages against the first party i.e. the insured person.
In this type, the insured person is not covered against any injuries but it covers the damages to other people caused by insured person. In order to claim against the first party, third party needs to provide the evidence showing the fault of first party for the damages caused and that he/she is legally responsible for it.