Difference Between Insurance and Assurance

Insurance is defined as an arrangement, in which the insurer commits to indemnify the loss or damage caused to the insured due to natural calamity or any other event whose happening is not certain, for special consideration. The term insurance is often juxtaposed with assurance, as these two are financial products sold by the company to people so as to protect their interest, however, they are different.

Assurance refers to the agreement in which the insurer provides cover of an event, which will happen sooner or later, such as death. So, if you are also looking for the difference between insurance and assurance, this article might prove helpful to you, take a read.

Content: Insurance Vs Assurance

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

Basis for Comparison	Insurance	Assurance
Meaning	Insurance refers to an arrangement, which provides cover for an event that can happen but not necessarily, like flood, theft, fire etc.	Assurance is a provision for coverage of an event, whose happening is certain, such as death.
Based on	Principle of indemnity	Principle of certainity
Protection against	An anticipated event	A definite event
Timing for payment of claim	Only at the happening of the uncertain event.	Either on the happening of the event or on maturity.
Duration	Only for one year, renewable after year.	Long term, running over number of years.
Type	General insurance	Life insurance
Purpose	To indemnify the insured, against any kind of risk.	To assure payment, on the happening of the specified event.
Policy	Taken to prevent a risk or provide against it.	Taken against an event, whose occurrence is certain.
Insurer	Undertakes to reinstate the insured to his/her previous position.	Undertakes to pay the sum assured, when the event takes place.
Insured	Undertakes to pay premium regularly, in exchange for indemnity against risk.	Undertakes to pay premium regularly, in exchange for benefit, on the occurrence of the event covered.

Definition of Insurance

The term ‘insurance’ is defined as a contract between two parties, whereby one party (insurer or insurance company) promises to indemnify the specified loss or damage incurred to the other party (insured) for an adequate consideration, i.e. premium. In short, it is the provision; wherein the insurance company gives the guarantee of compensation for the financial loss happened to the insured, in exchange for the premium.

The document in which the terms and condition of the insurance are stated is known as an insurance policy. It outlines the type of losses covered by the insurance policy and also indicates the maximum amount that will be paid by the company if the uncertain event occurs.

Insurance is a risk transfer mechanism, which guarantees monetary compensation, for the loss or damage, as a result of an event beyond the control of the insured party. The types of insurance are:

• Life insurance: The insurance that covers the life risk of the person is known as life insurance. This type of insurance is considered as assurance. Here the total sum assured is paid to the insured on the maturity of the policy or the family of the insured after his/her demise.
• General Insurance: Any insurance other than the life insurance is known as general insurance. It includes fire insurance, marine insurance or miscellaneous insurance. Here the compensation paid is equivalent to the loss incurred to the insured.

Definition of Assurance

A form of financial coverage, which provides reimbursement, for an event that is sure to happen (sooner or later), is known as assurance.

One of the best examples of assurance is life insurance, which covers the risk of the life of the policyholder. On the demise of the insured, the nominee will get the sum assured. In life insurance, insurance policy amount is payable only the occurrence of the event, i.e. death. Although, the life insurance also provides for payment of the policy amount at the maturity of the policy by installments. Life insurance is classified into three types:

• Whole life assurance: When the sum assured is payable only on the event of the death of the insured is the whole life assurance.
• Term life assurance: When the sum assured is paid in lump sum on the maturity of the policy term is called term life assurance.
• Annuity: When the sum assured is disbursed in the installment on the maturity, rather than one shot payment is called annuity.

Conclusion

To sum up this article, insurance and assurance are quite similar, but there is a thin line of difference between them, as in insurance provide protection to the holder to policy, from the incidents that are likely to happen, and they are compensated when the event occurs. On the other hand, assurance covers those incidents whose happening is unquestionable, but their time of occurrence is uncertain.