Difference between Insurance and Assurance
Key Difference: Insurance is a term that means guaranteeing safeguarding of an object, person or anything that is stated. Insurance is basically the transfer of the risk of loss from one entity to another in exchange of a payment. Insurance policies were usually for a limited time being. In regular terminology, the term assurance has a slight different meaning. The term refers to putting someone at ease, ensuring someone, or clearing someone’s doubts. When using ‘assurance’ to refer to financial products, it has a very similar definition to insurance. Assurance basically means till life. Life assurance is a policy that provides the person insurance for life.
The terms insurance and assurance are often heard when referring to financial product sold by a company. These words are used to refer to packages that provide a sum of money in return of premiums paid to safeguard an object. Financial companies, known as insurance companies, offer money in lump sum for safeguarding things like body parts, house, life, car, etc. Almost anything these days can be insured or assured. To many, the lines between insurance and assurance have blurred to the point that the terms are assumed to be the same. However, originally the terms referred to two different kinds of policies.
Insurance is a term that means guaranteeing safeguarding of an object, person or anything that is stated. Insurance is basically the transfer of the risk of loss from one entity to another in exchange of a payment. Insurance companies usually provide users with a policy that states in exchange of a monthly payment, the company is willing to take the risk of an object, person, etc. for the amount of time mentioned in the period. So, should anything happen to that said thing, person, etc., the loss would be incurred by the company, either fully or partially. Now, life insurance is a contract between the company and the insured that the company will provide the insured’s family an amount of sum at the death of the insured. For them to pay this sum, they require that the person pay premiums to the company for a number of years. Though, originally life insurances lasted a limited number of years or a specified amount of time mentioned on the policy; the policies these days usually last longer or until the death of the insured. Originally, if the insured survived to the end of the policy, the policy would have no value. Similarly, if a person is insuring an object, body part or any other such things, these policies have a limited time frame (commonly 1,3, or 5 years), until which the policy can be claimed, after this time, the policy lapses.
TheFreeDictionary.com defines ‘insurance’ as:
- The act, business, or system of insuring.
- Coverage by a contract binding a party to indemnify another against specified loss in return for premiums paid.
- A protective measure
- the act, system, or business of providing financial protection for property, life, health, etc., against specified contingencies, such as death, loss, or damage, and involving payment of regular premiums in return for a policy guaranteeing such protection
In regular terminology, the term assurance has a slight different meaning. The term refers to putting someone at ease, ensuring someone, or clearing someone’s doubts. For example: I was assured by my friend that my dog would be well taken care of. In this scenario, one friend is placing the other friend at ease so that she would worry about her dog. When using ‘assurance’ to refer to financial products, it has a very similar definition to insurance. Assurance basically means till life. Life assurance is a policy that provides the person insurance for life. There is no end to the policy until the person is dead. The insured can also remove any amount in the middle without facing any consequences, depending on the policies. In a Life Assurance policy, the insured issues a policy for a guaranteed sum. At the event of a death during the term, the policy pays out the guaranteed sum or the value of the annual investment bonuses, whichever is higher. Hence, assurance policies also increase the value of the investment of the sum.
Dictionary.com defines ‘assurance’ as:
- A positive declaration intended to give confidence.
- Promise or pledge; guaranty; surety.
- Full confidence; freedom from doubt; certainty.
- Freedom from timidity; self-confidence; belief in one's abilities.
The terms ‘insurance’ and ‘assurance’ used to mean different things, with insurance being for a limited time being and assurance being for longer periods of time or until death. However, these days the words are quite exchangeable in the insurance world. Today, many companies sell insurance policies, assurance policies as well as a mix of both policies. This has resulted in the lines between these two words becoming very blurred.
Image Courtesy: blogs.squaremouth.com, invesco.ie