Insurance is an agreement between the insurance company and an individual (insured). The insurer agrees to provide financial coverage to the policyholder for any expenses or losses incurred in an unforeseen event, such as illness and accidents. The insured pays a certain amount as a premium in exchange for the compensation.
Assurance is a type of insurance used in the context of life and term insurance policies. In assurance, the policyholder is assured compensation of a predetermined amount in case of eventualities like death or disability. If you live through the maturity period, you will have two options — receiving the amount as a monthly pension or as a lump sum amount.
In the insurance industry, the terms “insurance” and “assurance” are frequently used to describe the provision of financial aid to policyholders after a claim is accepted. While these terms may seem interchangeable, it is important to understand that there are significant differences between insurance and assurance. By grasping the distinctions, individuals can make more informed decisions when selecting coverage that suits their needs.
Key differences between insurance and assurance
To provide a clearer understanding of the differences between insurance and assurance, let’s examine them in a tabular form:
| Insurance | Assurance | |
| Objectives | Insurance aims to provide compensation for specific losses or risks. | Assurance focuses on offering financial protection over a lifetime or a specific period. |
| Type | Insurance is risk-based, covering events that may lead to losses. | Assurance is savings-based, offering a means of accumulating funds over time. |
| Scope of Coverage | Insurance has limited coverage, typically specified by events/risks. | Assurance provides coverage for a lifetime or a specific situation like death, disability, etc. |
| Renewability | Insurance policies are often renewable for a fixed term. | Assurance policies are usually non-renewable. |
| Claim Payment | Insurance provides compensation when the specified risk occurs. | Assurance pays out upon policy maturity, regardless of risk occurrence or when a pre-condition is met. |
| Number of Claims | Insurance policies usually allow for multiple claims. | Assurance policies generally allow for a single claim or payout. |