What is General Insurance?
What general (non-life) insurance is, how a policy works from premium to claim, who regulates it, which cover the law makes compulsory, and what happens when a policy is not renewed.
What it is
General insurance is all insurance business other than life insurance, which is why it is also called non-life insurance. It covers risks to property, liability, health and accidents, against perils such as fire, theft, accidents, natural calamities and third-party liabilities.
The dividing line is the kind of business, not the kind of event. A personal accident policy pays on accidental death or disability, yet it is general insurance. An endowment plan, which combines savings with protection on a human life, is life insurance. A factory building, for instance, can be insured under a fire policy.
How a policy works
The insurer promises, for a premium, to pay for covered losses that happen during the policy period. Most general insurance policies are annual contracts that are renewed each year. Some motor covers for new vehicles run longer.
The sum insured is, for most policies, the maximum the insurer will pay for a covered loss. It is a ceiling, not a promised payment: the claim is the assessed loss, subject to the policy terms, and may be well below the sum insured. Motor third-party liability for death and bodily injury is the notable exception, because it is not limited by a sum insured.
Who regulates it
General insurance in India is regulated by IRDAI, the Insurance Regulatory and Development Authority of India, which regulates life insurance as well. IRDAI was established as a statutory regulator under the Insurance Regulatory and Development Authority Act, 1999. The Insurance Act, 1938 is the older law that governs the business of insurance.
Motor third-party liability insurance is the most widely applicable compulsory cover; a few others are compulsory in specific situations. Under section 146 of the Motor Vehicles Act, 1988, a motor vehicle used in a public place needs at least third-party liability insurance, with limited exemptions such as certain government vehicles. It covers liability to third parties in an accident.
When cover ends, and when there is a dispute
Most general insurance policies simply end at expiry, and a loss after that date is not covered. Health policies may allow a grace period for paying the renewal premium so that continuity benefits are kept; the policy schedule shows it.
A complaint goes first to the insurer, which must resolve it within 14 days. If the insurer rejects it, does not reply within one month or gives an unsatisfactory reply, an individual policyholder can approach the Insurance Ombudsman within one year; the Ombudsman charges no fee. Since 10 November 2023 the Ombudsman can award up to ₹50 lakh; older study material still shows ₹30 lakh.
Rules at a glance
A renewal missed by ten days
Illustration: Anita runs a small bakery in Indore and has insured its contents against fire every year for six years. This year the renewal date passes while she is travelling, and ten days after expiry a short circuit starts a fire. The loss falls after the policy ended, so there is no cover for it. Six claim-free years do not carry the old policy forward, and a policy bought afterwards covers only later events.
The sum insured as a ceiling
- Assumptions, for arithmetic only: a health policy with a sum insured of ₹5,00,000 for the policy year, with no co-pay, sub-limit or restoration benefit.
- First claim: admissible hospital expenses are ₹1,80,000. The insurer pays ₹1,80,000, not ₹5,00,000. Balance for the year = ₹5,00,000 − ₹1,80,000 = ₹3,20,000.
- Second claim in the same year: admissible expenses are ₹4,00,000. Only ₹3,20,000 remains, so the insurer pays ₹3,20,000.
- Left with the policyholder = ₹4,00,000 − ₹3,20,000 = ₹80,000.
Result. The insurer pays ₹1,80,000 + ₹3,20,000 = ₹5,00,000 in the year, which is the sum insured; the remaining ₹80,000 is borne by the policyholder.
Key points
- General insurance means all insurance other than life insurance, and is also called non-life insurance.
- IRDAI, set up under the 1999 Act, is the regulator; the Insurance Act, 1938 governs the business.
- Third-party motor insurance is compulsory under section 146 of the Motor Vehicles Act, 1988.
- Most policies run for one year, and a loss after expiry is not covered.
- The sum insured is the most the insurer will pay, not the amount it will pay.
Common misunderstandings
- The sum insured is not what every claim pays: the insurer pays the assessed loss, up to that ceiling.
- The law does not demand comprehensive own-damage cover: third-party liability cover, with personal accident cover for the owner-driver subject to limited exceptions, is what is required.
- IRDAI was not created by the Insurance Act, 1938: it was established under the 1999 Act.
Questions people ask
Is health insurance general insurance?
Yes. Health and personal accident covers are part of general (non-life) insurance, along with motor, fire, marine and liability covers.
Does general insurance build up savings like an endowment plan?
No. An endowment plan is life insurance that combines savings with protection. A general insurance policy pays only for covered losses during the policy period.
Why do older books give ₹30 lakh for the Ombudsman?
That was the limit before the amendment effective 10 November 2023 raised it to ₹50 lakh. Notified limits change, so the current Rules are the place to check.
What this lesson relies on
- Insurance Act, 1938
- Insurance Regulatory and Development Authority Act, 1999
- Motor Vehicles Act, 1988 — section 146
- Insurance Ombudsman Rules, 2017 (as amended with effect from 10 November 2023)
- IRDAI Master Circular on Protection of Policyholders' Interests (5 September 2024)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.