Insurance and Assurance sounding similar; the words insurance and Assurance are commonly used by companies selling financial products. The two terms Insurance and Assurance are very confusing in financial world. When it comes to choosing financial products from insurance companies to safeguard interests of a person or an object, many companies prefer to use the word assurance as against insurance used by others. The person concerned is more interested in knowing the details of the policy rather than terminology, and hence it doesn’t really matter whether the policy refers to itself as assurance or insurance. These terms are irrelevant if the cover is right for the person or the object.
If we look up in a dictionary, the word Insurance refers to means of guaranteeing protection of an object or a person, or a guarantee against loss or damage. People getting this insurance or protection have to pay premiums or instalments monthly or yearly to the company which undertakes to pay in the event of loss or damage or death. There are various types of insurance products available in the market such as health insurance, life insurance, home insurance etc. In fact, companies have been insuring everything under the sun these days, even body parts such as breasts, legs, denture and voice are being insured.
In life insurance alone, there are policies that provide cover only and the family of the person receive the amount in the event of death of the person and nothing if he survives the period of the policy. But majority of people go for insurance policies of limited time period where they receive the amount proposed along with bonus that has accrued at the end of the term of the policy.
Assurance, according to dictionary means making someone feel comfortable with a decision and clearing his doubts. If you are assuring someone, you are instilling confidence in him. When a person takes life assurance policy, he gets a cover for his entire life, no matter when his life ends. Every premium that he pays to the company adds to the value of the policy, ands when this added up value equals the death benefit that the person has been assured, the policy is said to have matured. In life assurance, a person can choose to cash out his policy anytime he so desires.
Both insurance and assurance are financial products offered by companies operating commercially but of late the distinction between the two has increasingly become blurred and the two are taken to be somewhat similar. However, there are subtle differences between the two which are as follows.
Insurance policy refers to protection against an event that might happen whereas assurance policy refers to protection against an event that will happen. This means that insurance policy is taken to prevent a risk or provide cover against a risk while assurance policy is taken against an event that is definite.
Assurance policies are undertaken by people knowing that their death is certain. They keep on paying premiums knowing that their heirs will receive a big amount whenever they die. Company issuing assurance policy is assured of the death of the person and also that it has to pay the amount whenever the person dies. Because of this assurance factor, such a policy is called assurance policy.
In case of insurance policy, the company pays the amount to the dependants of the person if all the premiums have been paid on time and the person dies within the duration of the policy. In most of the cases, the person does not die within the term of the policy, hence it is called life insurance.
In life insurance, the dependants receive the policy if all premiums paid on time and the person dies within the duration of policy. In life assurance, a person can choose to cash out his policy anytime he so desires.
Thank you. The article is an eye opener!