Insurance vs Assurance: Key Differences Explained for Better Understanding

When it comes to buying an insurance policy, many prefer to reach out to an insurance agent or a middleman. This is because insurance documents are riddled with jargon making it confusing for a layman to grasp it quickly. Two such terms are ‘insurance’ and ‘assurance’ which are commonly found in insurance policies depending on the policy you are looking at. If you are someone wanting to know how they differ from each other, continue reading to know more: Insurance and assurance are two terms that are often used interchangeably in life and general insurance policies, but they actually have different meanings. While both offer some form of protection against financial loss, they differ in their scope and purpose.

What is the meaning of Insurance?

Insurance is a contract between an individual and an insurance company that provides financial compensation for unexpected events, such as accidents, illness, or damage to property. In exchange for regular payments of premiums, the insurance company agrees to cover the cost of any losses incurred by the policyholder. The compensation paid by the insurance company is usually equal to the amount of the monetary loss. Further, insurance plans have a specified validity during which the company offers coverage. *

To explain it with an example:

Mr Rajesh purchased a new car. With its registration came the requirement of a car insurance policy, a form of general insurance coverage. To ensure compliance with the law, he intended on buying a third-party policy. However, the dealer convinced him that a third-party plan is not sufficient to safeguard against damages to his vehicle. That’s when Mr Rajesh decided to opt for a comprehensive car insurance policy that offers own-damage cover along with the minimum required third-party coverage. In addition, personal accident cover ensures financial coverage for injuries and death to him. Being a broader insurance coverage, there also is an option to enhance it using add-ons. While car insurance is one example to explain the term insurance, there are also other insurance plans such as travel insurance , property insurance, crop insurance, and more.

What is the meaning of Assurance?

Assurance, on the other hand, is a type of insurance that provides protection against a certain event that is certain to occur, such as death or disability. Unlike insurance, assurance policies do not have an expiration date, or if they do, are valid for a long period. Insurance policies that provide assurance, typically, require regular payments over a longer period of time. The policyholder or their dependents are the beneficiaries of the pay-out paid by the insurance company. *

To explain it with an example:

Mr Kamlesh purchased a term insurance plan for himself. Since a term insurance policy provides pay-out only on the demise of the policyholder, it is a guaranteed payment for his dependents during the policy’s tenure. For other types of life insurance plans, there are also maturity benefits, such as an endowment policy, where the policyholder can take the benefit of the maturity proceeds. Another example of a policy that has assurance is a critical illness health insurance plan that pays compensation to the policyholder on the diagnosis of specified ailments. One way to understand the difference between insurance and assurance is to think of insurance as protection against risks that might happen in the future, while assurance is protection against events that are inevitable. It is important to note that the terms insurance and assurance can vary in meaning depending on the country and the industry. In some countries, for example, the terms are used interchangeably, while in others they are used to describe different types of policies. Therefore, it is essential to read the terms and conditions of any insurance or assurance policy carefully to fully understand the coverage and benefits provided.

Difference Between Insurance and Assurance

As described above, insurance is mostly associated with general insurance policies such as health insurance, travel insurance, bike insurance or car insurance, while assurance is used with life insurance policies. Here’s a table that enlists the differences:

Insurance	Assurance
Objective
The objective of insurance is to compensate for the loss incurred such as theft, accidents, fires, floods, etc.	Its objective is to provide monetary support to a future certain event such as the death of the policyholder.
Claim amount
The claim amount for plans with insurance is approximately equal to the loss suffered. *	The claim amount for plans with assurance is defined from the start. *
Number of claims permitted
Depending on the policy terms, multiple claims are allowed for plans with insurance benefits. *	Only one claim is allowed for plans that offer the assurance benefit. *
What is insured?
People and property, both are insured under these types of policies.*	Only people are insured under policies that provide assurance benefits. *
Nature of the risk covered
Plans with insurance benefits cover risks that are uncertain and unpredictable such as an accident, burglary, theft, natural calamities, etc.*	These plans cover uncertain but predictable risks like the death of a person. *

  * Standard T&C Apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.