Insurance and assurance are quite similar, but there are thin lines of difference between them, as the insurance provides protection to the holder of the 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. Let's see it in detail...
What is Insurance?
Insurance is a financial product that provides protection against a specific risk or set of risks. For example, car insurance protects against the risk of damage to a vehicle, while health insurance protects against the risk of medical expenses. Insurance is typically purchased by individuals or businesses to protect against potential financial losses that may arise from unexpected events, such as accidents, natural disasters, or illnesses.
What is Assurance
Assurance, on the other hand, is a type of financial product that provides protection against a specific event or outcome. For example, life assurance is a type of insurance that provides financial protection to the policyholder's family in the event of their death. Other types of assurance products include mortgage assurance, which protects against the risk of default on a mortgage, and travel assurance, which protects against the risk of unexpected expenses while traveling.
Key Differences Between Insurance and Assurance
|A contract, which provides cover for an event that can happen but not necessarily, like a flood, theft, fire, etc. is known as insurance.||A provision for coverage of an event, whose happening is certain, such as death, is called assurance.|
|Insurance is based on the principle of indemnity||Assurance is a bit different, which relies on the principle of certainty.|
|Insurance provides protection against an anticipated event||On the other hand, Assurance tends to provide protection against a definite event.|
|In the case of insurance, the reimbursement of the loss or damage will be paid only on the occurrence of the uncertain event.||Conversely, in assurance, the insurable amount is paid either on the death of the insured or at the maturity of the policy.|
|The duration of insurance is only one year, in essence, the policy is renewed on the expiry of the term.||On the flip side, assurance is for the long term, which operates over a number of years.|
|Insurance, covers general insurance, i.e. fire insurance, marine insurance or miscellaneous insurance.||Assurance covers life insurance, such as whole life insurance, term life insurance, and annuity.|
|Insurance aims at identifying the insured against any risk.||the main purpose of assurance is to assure payment, on the happening of the specified event.|
|An insurance policy prevents the specified risk or provides protection against it.||the policy is taken against a definite event.|
|In insurance, the insurer commits to reinstate the insured to his/her previous position; which was occupied before the event took place.||In contrast, assurance commits to pay the sum assured, when the event takes place.|
|In insurance, it is the duty of the insured to pay premiums at regular intervals so as to receive indemnity against risk.||As opposed to assurance, in which the insured undertakes timely payment of premium, in return for the benefit, on the happening of the event covered.|
In summary, insurance and assurance are similar in that they both provide financial protection against specific risks or outcomes. However, insurance is typically used to protect against a range of potential risks, while assurance is typically used to protect against a specific event or outcome.