Insurance and Assurance are the most common terms used in insurance terminology. These terms although mean the protection against certain perils are different in terms of coverage offered to the policyholder. These terms often create confusion among the general public and there is a need to understand the usage of these terms, particularly in the insurance industry.
The understanding and penetration of insurance have increased in recent years due to the advent of technology and increasing awareness among customers. In the early years of the insurance industry, people used to depend heavily on the agents for their insurance purposes and get the information completely from the agents.
Customers were at the mercy of the agents and this lead to the mis-spelling of insurance products. But due to the increasing awareness created by the regulatory bodies common people have started to learn more about the insurance product and the terminology used in insurance products.
Difference between Insurance vs Assurance:
Let us understand the difference between insurance and assurance, where and when to use these words:
- Meaning:
- Insurance: Insurance guarantees financial coverage in case of loss due to an insured peril or an uncertain event such as an accident, hospitalization, fire damage, etc. The uncertain event may or may not happen during the policy period. This uncertainty is covered under the term Insurance.
- Assurance: Assurance guarantees financial coverage in case of loss due to a certain event; such as death. The event is certain to happen at any time during the policy period where the coverage is applicable. The certainty of happening is covered under the term Assurance.
- Concept Used:
- Insurance: Insurance is based upon the Principle of INDEMNITY i.e. the policyholder is compensated in such a way that he/she was just before the occurrence of the loss. In simple terms, what is lost is replaced or compensated accordingly.
- Assurance: Assurance products are known as the Benefit Products i.e. the policyholder or the beneficiaries are given the complete sum assured in case of the occurrence of a certain event.
- Products type:
- Insurance: Insurance term is used for general insurance products such as Fire/Property insurance, Motor insurance, Health insurance, Marine insurance, etc. Where the policy works on the principle of indemnity.
- Assurance: Assurance term is used for Life and other allied insurance products such as Term insurance, Personal accident insurance, etc. Where the policy words are on a benefits basis.
- Claim Payout:
- Insurance: In Insurance products, the claim payout is done based on the actual or sum insured whichever is lower. In the event of the occurrence of peril, the claim amount paid to the policyholder will be the actual amount incurred or the sum insured specified, whichever is lower.
- Insurance: In Assurance products, the claim is paid without taking into consideration of the incurred amount. In case of happening of a certain event such as death, the sum assured under the policy is paid to the beneficiary or nominee.
- Duration of cover:
- Insurance: Insurance products typically have a duration of one year after which they are renewed. The insurance products are the short term plans which have a duration of a maximum of 3 years.
- Assurance: Assurance products are offered for many years or a lifetime. The duration may run through the entire life of the insured.
- Premium Payment:
- Insurance: Insurance products have the option of one time premium payment at the start of the policy period. In Motor insurance the premium is to be paid at the start of the policy period and is to be renewed every year by paying a premium.
- Assurance: In Assurance products, the premium is paid periodically or a one time payment for life coverage can be made depending on the type of the policy. In life insurance, the premium can be paid every year or half yearly or quarterly or monthly for a specific period, or one time.
What is Insurance?
Insurance is a policy that refers to an agreement or contract where an insurer pays an amount to insured persons for the loss or damages caused due to uncertain incidents. For example, car insurance plans, and personal accident cover plans come with sum insured amounts that offer compensation for medical expenses, critical illnesses, physical disabilities caused by injuries, and accidental death benefits.
Example:
Sunil bought a car. Since it is mandatory by law to buy a basic motor insurance policy, He purchased a Third-party policy to get coverage against third-party risks. The coverage includes compensation against injuries to someone else, damages to their property/vehicle, or loss of life while driving.
To get extended coverage, he also purchased the Own Damage component for the car insurance policy. Through this, he can claim damage caused to his car. The coverage includes damage from fire, accidents, theft, natural and man-made calamities, etc.
What is an Assurance?
Assurance is similar to insurance in that they both offer financial coverage but their usage and scope are different. Assurance promises to reimburse a predetermined amount of money when an inevitable event occurs, such as death or when the tenure of the policy is over. Here the policyholder is assured that he/she will receive compensation upon the occurrence of a certain event. For example, death or disability. These policies are usually valid for a longer duration of time as compared to General Insurance policies.
Example:
Ajay bought an Endowment plan for himself. This type of life insurance policy provides a dual benefit of life coverage and death. Under this plan, Ajay can receive the maturity benefit when the policy expires. The insurance company will pay a lump sum amount to Ajay when the policy matures. In case of his death, the nominee of the policy will receive the sum assured.
What is the Comparison of Insurance and Assurance?
Most insurance plans come with insurance and assurance coverage that cater to the requirements of policy buyers. However, customers should evaluate them with more attention to determine which one is the best.
It is wise to know about all the plans online before buying them. The difference between insurance and assurance allows a policy buyer to proceed further while purchasing a plan. Besides that, it gives ways to select a plan with the best insured and assured amounts for future life.
| Comparison |
Insurance |
Assurance |
| Object |
To compensate for the loss. For example, the loss incurred during an accident, fire, theft, flood, etc. |
To provide monetary support for a specific situation. For example, a major illness, death, disability, etc. |
| Coverage |
Coverage is provided against various risks that may lead to an unforeseen situation |
Coverage is provided against the definite event |
| Renewability |
Annually |
Not applicable |
| Premium Payment |
Yearly or one time |
A year or half yearly or Quarterly or Monthly or Specific period or time |
| Tenure of Insurance |
Less |
More |
| No. of claims allowed |
Multiple |
One |
| Policies |
General insurance like Car or Bike |
Term insurance, life insurance, ULIP, etc. |
| Claim Payment |
Approximately, equal to the amount of loss. For example, the cost of repairing/replacing vehicle parts, hospitalization bills, etc. |
Pre-decided amount to cover a specific event. For example, a major illness like cancer, the death of the policyholder, etc. |
| Number of insured |
One or more based on the insurance policy |
one |
Conclusion:
To conclude, insurance and assurance are similar but still different. It is important to know these terms so that you can make effective decisions about your finances. For the best online insurance quotes visit www.policybachat.com and get the best online insurance policies with rider coverage from the top leading insurance companies within your budget.
It is also suggested by the insurance experts that you purchase an insurance policy online as it would be more cost-effective and beneficial for you than purchasing it offline. To save the commission the insurance company charges for the agent on the policy, you can purchase it yourself by navigating through a buying process. After making a purchase, you will have access to information about your plan. Apart from this, you can compare different plans and calculate the premium rates sitting in the comfort of your home.