What is the difference between Insurance and Assurance?

Posted on: Aug 11, 2023 | | Written by: None

What is the difference between Insurance and Assurance?

In the insurance industry, the terms "insurance" and "assurance" are frequently used to describe the provision of financial aid to policyholders after a claim is accepted. While these terms may seem interchangeable, it is important to understand that there are significant differences between insurance and assurance. By grasping the distinctions, individuals can make more informed decisions when selecting coverage that suits their needs.

Difference between Insurance and Assurance

To provide a clearer understanding of the differences between insurance and assurance, let’s examine them in a tabular form:

	Insurance	Assurance
Objectives	Insurance aims to provide compensation for specific losses or risks.	Assurance focuses on offering financial protection over a lifetime or a specific period.
Type	Insurance is risk-based, covering events that may lead to losses.	Assurance is savings-based, offering a means of accumulating funds over time.
Scope of Coverage	Insurance has limited coverage, typicallyspecified by events/risks.	Assurance provides coverage for a lifetime or a specific situation like death, disability, etc.
Renewability	Insurance policies are often renewable for a fixed term.	Assurance policies are usually non-renewable.
Claim Payment	Insurance provides compensation when the specified risk occurs.	Assurance pays out upon policy maturity, regardless of risk occurrence or when a pre-condition is met.
Number of Claims	Insurance policies usually allow for multiple claims.	Assurance policies generally allow for a single claim or payout.

What is the Meaning of Insurance?

Insurance is an agreement between the insurance company and an individual (insured). The insurer agrees to provide financial coverage to the policyholder for any expenses or losses incurred in an unforeseen event, such as illness and accidents. The insured pays a certain amount as a premium in exchange for the compensation. The compensation the insurance company pays is usually equal to or less than the expenses/losses incurred. All insurance policies have a sum insured, that is, the maximum amount that you can claim. Also, an insurance policy has a fixed tenure. To stay covered, you have to renew the policy before its expiry. If you don’t pay the premium on time, the policy will lapse, and any loss/expenses during this period will not get covered by insurance.

Here’s an example to help you understand.

Five years after purchasing a health insurance plan, Rohini met with an accident, leaving her severely injured. She had to undergo surgery, which cost INR 4.5 lakh. As the sum insured of her healthcare plan was INR 6 lakh, her insurer reimbursed the medical expenses except the deductibles and other exclusions, if any. She could not have claimed the expenses if she had not renewed the policy on time.

What is the Meaning of Assurance?

Assurance is a type of insurance used in the context of life and term insurance policies. In assurance, the policyholder is assured compensation of a predetermined amount in case of eventualities like death or disability. If you live through the maturity period, you will have two options — receiving the amount as a monthly pension or as a lump sum amount. Compared to general insurance policies, these policies have a longer duration.

Here’s an example to help you understand.

Shivam bought a life insurance policy of INR 25 lakh for a tenure of 30 years. There are 2 options – if Shivam survives the policy tenure of 30 years, he will receive the maturity amount. If he dies during the policy term, the nominee will get the assured sum of INR 25 lakh.

Conclusion

Both insurance and assurance provide financial compensation, but they are different in many ways, as mentioned above. Hope you have got a clear understanding of insurance vs assurance to help you understand what each plan offers. Sign up for the one that meets your requirements. You can also buy both insurance and assurance plans for added protection. Buying the best health insurance will shield your finances against unexpected medical expenses. Choose the right options and shield yourself and your loved ones from unanticipated life-changing circumstances.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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