Valuable things need protection from natural calamities, incidents, and accidental damages. Financial institutes like insurance companies provide the protection to either reinstate the damage or to pay for the cause.
Insurance and assurance are the products used to get insured on valuable things.
However, the products are used to ensure different things, and the period of insurance also differs.
- Insurance provides financial protection against unforeseen events or risks.
- Assurance covers inevitable events, like death, offering guaranteed benefits.
- Life insurance covers a set term, while life assurance offers whole-life coverage.
Insurance vs Assurance
Insurance is a contract between an individual or business and an insurance company to provide financial protection against risks or losses. Assurance is a form of financial protection that guarantees a specific outcome, such as a payment or benefit, regardless of whether a specific event occurs.
The insurance policy company defines the incidents upon which occur the company will pay a sum of money to the insured person to restore the loss.
Insurance can be taken on vehicles, homes, property, and other body parts.
Insurance is renewed every year to protect assets against the risks that could happen in the future.
Assurance is also a product of an insurance policy used to value a person’s life.
The insurer will assure to pay a sum of money to the insured person after a certain period. The period can be the whole life of a person.
An assurance policy is a policy made on the incidents that will happen for sure in the future.
|Parameters of Comparison||Insurance||Assurance|
|Policy Type||It is general insurance made on people and property to overcome losses during uncertain situations.||It is life insurance made on people only paid after death.|
|Term||Insurance is done for a year which can be reviewed later.||Insurance is done for the whole life of a person or a certain decided period.|
|Risk covered||Natural calamities, vehicle damage, repairs, diseases, and other unpredictable risks||Predictable risks like death.|
|Amount claimed||The claimed amount is the total loss incurred.||The claimed amount is the pre-defined amount plus profits.|
|Number of Claims||The insurance can be claimed many times.||It is claimed only once.|
What is Insurance?
Insurance is a preparation to face uncertain risks confidently. Today, everything is insured, from mobile phones to living.
Insurance provides financial support when an uncertain event occurs. Some uncertain events are natural disasters and damage to properties, life, and other valuable assets.
Insurance companies help people financially by offering various types of insurance such as car, vehicle, home, property, mobile, and health insurance.
Each insurance policy has different terms and conditions upon which occurring the insurance is claimable.
In the case of health insurance, the company will provide support in treating defined diseases and only in defined hospitals.
It does not bear complete treatment expenses but provides financial support.
Insurance works on the principle of indemnity, where the insurance company only pays for the loss that occurred within the defined tenure.
When the period of insurance is finished, no incident occurred, then the insured person can either renew or claim the insured sum without any profit.
The insurance amount depends on the current market asset value and the loss paid as per the market value.
The insurance company only supports the insured person to overcome the loss, whether small or big. Insurance on valuable things does not provide confidence to the insured person to full support.
What is Assurance?
Assurance is the other product of insurance companies as its name assures them to provide financial support when an incident occurs.
An incident in the assurance policy is an incident that occurs in the future, such as death.
An assurance policy is a life insurance and assurance that persons get benefits, a sum amount, and profits after death.
Assurance works on the principle of certainty the company will pay the sum of insured money and profits to the insured person or the nominees.
The assurance has tenures, such as it can be a long-term commitment or a certain period. The insured person pays a premium amount to get the benefits at the time of event occurrence.
Assurance comes in different types, like life insurance, term insurance, and annuity. The policy is insured only gained one incident, and that is death.
The death may be due to a disease or accident. The amount received by the insured person is decided at the time of insurance commencement.
It is claimed only once in the tenure and at the end of tenure. The insurer will reinvest the amount to earn profits for the insured person.
The insurer will assure to give the sum of the amount and reduces the stress of the insured person.
Main Differences Between Insurance and Assurance
- Insurance protects against unexpected events, while assurance protects against definite events.
- The insurance amount is equal to the loss or current value of the asset, whereas the Assurance amount is the predefined amount, including the benefits.
- Insurance can be done on any valuable asset like vehicles, gadgets, property, and health, whereas an assurance policy is only for life.
- Insurance tenure is only for a year and can be renewed, whereas an assurance policy tenure is for a person’s whole life and cannot be renewed.
- Insurance policy only provides some financial support, whereas Assurance gives peace of mind to the insured person.
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.