Insurance vs Assurance: Know the Difference

The terms insurance and assurance are the most common words used in the insurance industry. Both the terms are used when the insurance company provides financial aid after raising the claim. This article will make you understand the difference between these two terms. So that you do not get confused while purchasing an insurance policy and you can purchase the policy online without any confusion. This will be beneficial as well as cost-effective for you.

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    Here is the Difference between Insurance and Assurance

    Both insurance and assurance might sound similar, but when you buy the policy you actually get to understand the difference between the two. Lets see how both of them differ and are similar to each other.

    Here is table with the difference between Insurance and Assurance:

     

    Insurance

    Assurance

    Objective

    Compensate the damage or loss. Example, Accident, theft, fire damage, etc

    Provide financial support for specified situation. Example, Disability, Death, etc.

    Types of Policies

    General insurance like car or bike insurance, home insurance, etc

    Term insurance, life insurance ULIP, etc

    Coverage

    Property Insurance, medical insurance, two-wheeler & four wheeler insurance.

    Disability, Life and death cover.

    What is Insured?

    Building, content, health depending upon the policy.

    Person/Policyholder

    Renewability

    Annually

    N/A

    Claim Payment

    Equal to the amount of loss or damage caused in an accident. Example, repairing of  bike after accident, hospitalization cost coverage, etc.

    Amount is pre-decided for a specified event or situation. Example, disability, death due to major illnesses like cancer, etc.

    No. of Claims allowed

    Multiple

    One

    Let us begin by telling you about the term ‘Insurance’ first:

    What is the Meaning of Insurance?

    An insurance policy is a contract between the insurance company and the buyer. When a person wants to protect his home, car, etc. in case of an unforeseen incident that causes damage or loss to the policyholder. Then according to the loss, the insurance company provides financial cover so that the policyholder does not have to pay for it out of pocket.

    In order be stay covered under the policy, the policyholder will have to pay an amount as a premium. The compensation or reimbursement provided by the insurance company is approximately equal to the amount of loss. Insurance plans come with a fixed validity period and a specific sum insured amount for which the company is liable to compensate during the validity period.

    If you do not pay the premium on time or do not renew your policy then the policy will lapse and you would not be covered anymore.

    Here is an example:

    Let me give you an example, Rohan purchased a bike. Since it is mandatory to have a third-party liability insurance policy in India, it is suggested that the bike owner purchase a comprehensive insurance policy that can provide overall coverage to the third party as well as you. Rohan purchases the comprehensive plan.

    Since a comprehensive plan provides cover for loss or damage caused to the bike, theft, injury, personal accident cover, loss of life, etc. One day he was going to his office and at a sharp turn meets an accident. Lucky Rohan had comprehensive insurance that provided him financial aid for the damage caused to his bike as well as the sustained injury.

    In case his policy got expired and he did not renew it before the expiry date and he met an accident after that, the insurance company would not provide him cover for the damage and sustained injury.

    What is the Meaning of Assurance?

    The term assurance is used in the insurance industry that to in terms of life and term insurance policies. In a life insurance policy, the policyholder is given assurance that he will receive compensation in case of a certain event like death or disability. Also, if the policyholder survives the maturity period of the policy, he/she would have an option of receiving the amount on monthly basis as a pension. These policies have a longer duration than general insurance policies.

    Here is an example:

    Let me give you an example, Rajiv purchased a life insurance policy. He purchased an endowment plan for himself. He purchases the policy with a sum insured amount of Rs. 50 Lakh. This is a type of plan that provides two types of benefits. If Rajiv survives till the maturity of the policy then he will get a lump sum amount from the insurance company. If Rajiv dies during the policy tenure then the nominee will receive the sum insured amount.

    There are other examples of life insurance policies that are term insurance, ULIP, and Whole life policy.

    So, this was the basic difference between the term insurance and assurance.

    Conclusion

    Purchasing an insurance policy brings you an assurance that the insurance company will provide your financial aid in case of loss or damage caused to you or your asset under general insurance and you get a good return on the maturity of the policy under the life insurance policy or a term insurance policy and in case of your death, the nominee gets the sum insured amount.

    It is also suggested by the insurance industry experts that you purchase insurance policy online as it would be cost-effective and beneficial for you than purchasing it offline. Purchasing the policy will cut out the cost of an insurance agent and you can learn about a particular plan thoroughly. Apart from this, you can compare different plans and calculate the premium rates sitting at the comfort of your home.

    Written By: PolicyBazaar - Updated: 08 July 2021

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