What is the Difference Between Insurance and Assurance?
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Difference Between Insurance and Assurance?

Difference Between Insurance and Assurance?
  • 9th Oct 2021 |
  • 14,329

When planning your finances, insurance and protection plans prove to be highly beneficial means to accomplish your goals. However, it is no secret that most applicants and policy buyers find it challenging to comprehend the different terminologies and technical jargon that are generally used interchangeably with the word insurance. One such word that is used synonymously with insurance is assurance.

In essence, insurance plans cover any loss or damage that an uncertain event may cause, for example, a natural calamity, an accident, fire, theft, etc. So, they work on the ‘if’ and indemnity principle and 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. So, 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 if the insured dies during the policy period. The insurance contract will become void if the policyholder survives the policy period, and the insurer does not have to pay anything. There is doubt about the insured event’s occurrence in this situation.

What is Assurance?

Assurance is 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, most life insurance products having an investment component are assurance policies.

The Difference Between Insurance vs Assurance

Although insurance and assurance may have similar sounds, when you get a policy, you truly learn the distinction between the two. Let’s examine the differences and similarities between the two of them.

Comparison Factors

Insurance

Assurance

Objective

It helps to reinstate financial stability during an untoward event.

Pays out the assured sum when the event takes place.

Underlying Principle

Principle of Indemnity

Principle of Certainty

Type

General insurance products include term insurance, motor insurance, health insurance, liability insurance, etc.

Life insurance (except term insurance) includes whole life assurance, annuity, endowment plans, etc.

Claim payment

Equal to the amount of loss or damage during an accident.

Pre-defined for a particular event.

Number of Claims

Multiple

One

Duration

Short term

Long-term

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. On the other hand, an assurance comes with specific plans or ways for saving and a definite benefit at maturity; therefore, they are usually life insurance plans, e.g., whole life insurance, endowment plans, and to a specific degree term insurance (although often debatable).

The purpose of insurance and assurance are 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 assurance vs insurance can help you better grasp various insurers’ products. It would help to understand the difference between insurance and assurance before choosing the appropriate plan based on your requirements and ambitions.


- A Consumer Education Initiative series by Kotak Life

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