What is the Difference Between Insurance and Assurance?

What Does Insurance Mean?

Insurance is an agreement between an insurer and a person purchasing the policy which states that the insurer shall offer compensation in the event of specified loss, for a premium amount. Here, the compensation provided will be subject to the coverage offered as per the policy terms. Furthermore, insurance plans have a fixed tenor during which the policyholder can claim compensation in case of loss. The tenor of the plan is termed the policy period.

Example:

Imagine you have purchased a health insurance plan with a policy period of one year. In case of a medical emergency, you can opt for cashless treatment at a network hospital associated with the insurer. Here, you do not have to pay for the healthcare expenses incurred as you have chosen to claim for cashless hospitalisation. If the insurance claim satisfies the policy terms, the insurance provider shall directly settle the medical expenses with the hospital.

What Does Assurance Mean?

Assurance is a term which is often used in regards to life insurance where the insurer agrees to offer a pre-decided compensation in case of the death of the policyholder, for a premium amount. Such plans have a longer tenure when compared to the insurance policies we discussed in the previous section. You shall find policies with a minimum tenor of 5 years.

Example:

Let us assume that you have purchased a term life insurance plan which offers a life cover. Under this plan, if something unfortunate were to happen to you during the policy period, your beneficiary shall receive a lump sum death benefit. This amount can be used to satisfy the financial requirements of your dependents in your absence. Similar examples of life insurance plans are whole life insurance, term insurance, Unit-Linked Insurance Plan (ULIP), etc.

Difference Between Insurance and Assurance

Now, let us understand the difference between insurance and assurance in the below comparative view:

Wrapping it Up!

With this, we hope you have a better understanding of the difference between insured and assured. To help maximise your insurance coverage to enjoy more benefits, it is crucial to know such insurance jargons as you might come across these terms quite often. However, being insured is important to safeguard yourself and your loved ones against unforeseen risks.

Many times unknown perils do not come with a warning and that is when we regret not having sufficient backup the most. Both general insurance and life insurance provide financial security against potential risks or unforeseen events, which is why you must opt for the right insurance plan! Having a life insurance plan does not eliminate the need for general insurance such as a health plan as both serve different purposes in your life. So, ensure you have opted for maximum coverage to safeguard yourself against any financial losses with insurance!

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