In some ways life insurance is similar to every other type of insurance in that life insurance is a pooling of risk among a large number of people who want to transfer a large risk (economic loss of dying) in trade for a small premium.
One thing unique to life insurance is that the risk it insures only happens once - death. Most other types of insurance insure events that could happen multiple times, such as accidents, fires, disabilities, etc.
Life insurance pays a death claim when you die. Car insurance pays a claim when your car is wrecked or stolen. Home owners insurance pays a claim if your home is damaged or for certain personal liabilities. Health insurance pays doctors and or hospitals when you incurr health care expenses.
They are all similar but designed to do different things.
Life insurance pays the death benefit to the beneficiary upon the death of the insured person. In contrast, most other insurances (health, disability, long term care, property) pay while the person is still alive.
When life insurance is permanent, it can also pay while the insured person is still alive, after a set period of time. Then, unlike the the other insurances, it pays regardless of whether there is an event to trigger payment or not.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Life insurance is the same as other insurance in that they are based on the idea of pooling a risk. However, other insurance policies are contracts of indemnity. They are insuring against something that might happen. Human mortality is stuck at 100%. As a result to finance the expense of the death benefit when the insured’s risk increases every year causes the companies to provide insurance with cash value. That cash value offsets the increasing costs. Other forms of insurance merely expire.
Insurance Adviser - Broker, SC Insurance Services, Oahu, Hawaii
Since your question was "How does life insurance DIFFER from other types of insurance" I'll focus on that rather than how it's similar to other types of insurance. Of course there's different types of life insurance, so the differences will not always be the same. Health, car and sometimes liability insurances usually have a deductible or a co-pay - life insurance does not.
in the case of permanent life insurances it will grow a cash value that may be accessed by the owner, and this cash value growth is tax-free. No other insurance has this feature.
With whole life insurance you may stop paying premiums at some point and still continue to have the insurance! No other insurance offers that either as far as I know.
I'm sure there are other differences but would need to compare to specific insurance products to see what they are. Interesting question! Hope this helps!
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One thing unique to life insurance is that the risk it insures only happens once - death. Most other types of insurance insure events that could happen multiple times, such as accidents, fires, disabilities, etc.
They are all similar but designed to do different things.
When life insurance is permanent, it can also pay while the insured person is still alive, after a set period of time. Then, unlike the the other insurances, it pays regardless of whether there is an event to trigger payment or not.
in the case of permanent life insurances it will grow a cash value that may be accessed by the owner, and this cash value growth is tax-free. No other insurance has this feature.
With whole life insurance you may stop paying premiums at some point and still continue to have the insurance! No other insurance offers that either as far as I know.
I'm sure there are other differences but would need to compare to specific insurance products to see what they are. Interesting question! Hope this helps!