What is the Difference Between Insurance and Assurance?

• 9th Oct 2021
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When it comes to planning your finances, insurance and protection plans prove to be highly beneficial means to accomplish your goals. However, it is no secret that the majority of applicants and policy buyers find it difficult to comprehend the different terminologies and technical jargons that are generally used interchangeably with the word insurance. One such word that is used synonymously with insurance is assurance.

In essence, insurance plans provide cover for any loss or damage that may be caused by an uncertain event, for example, a natural calamity, an accident, fire, theft, etc. They work on the ‘if’ and indemnity principle and therefore provide you with the cover after an event happens. However, in an assurance plan, the cover is given to you for an event that is certain to happen. It works on that ‘when’ principle or the principle of certainty.

What is Insurance?

Insurance is a contract where the insurer compensates the insured for damage or losses incurred from natural disasters or any other unforeseen event in exchange for a premium. A term insurance policy, for example, guarantees to pay a specified amount of money if the insured dies during the policy period. The insurance contract will become void if the policyholder survives the policy period, and the insurer then does not have to pay anything to them. There is doubt about the insured event’s occurrence in this situation.

What is Assurance?

Assurance refers to an arrangement in which an insurer pays reimbursement for a specified occurrence, such as death. Assurance policies provide continuous coverage until the policyholder’s death. For example, a whole life insurance policy provides financial protection for the rest of the policyholder’s life. Thus, the insured event will undoubtedly occur sooner or later. Aside from term insurance, the majority of life insurance products having an investment component are assurance policies.

The Difference Between Insurance vs Assurance

We find that insurance plans have conditions, on which the company decides what kinds of loss or damages are covered within the policy. Along with of course the amount payable. An assurance, on the other hand, comes with certain plans or ways for saving as well and a definite benefit at maturity; therefore, are usually life insurance plans e.g., whole life insurance, endowment plans, and to a certain degree term insurance (although often debatable).

The purpose of both these plans is different, and so is their usage. For maximum security having both can help, however much of it comes down to the needs that one has and what is suitable for them, which may change with time. Understanding the difference between insurance and assurance can help you better grasp all of the products that various insurers offer. You must choose the appropriate plan based on your requirements and ambitions.

- A Consumer Education Initiative series by Kotak Life