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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:

Parameters

Insurance

Assurance

Type of Category

General Insurance

Life Insurance

Objective

To offer compensation for the loss incurred such as healthcare treatment.

To offer financial backup against the unfortunate mishap such as the death of the insured.

Coverage

Coverage is offered for numerous unforeseen events.

Coverage is offered for a definite occurrence.

Claim Payment

Compensation is equal to the loss incurred such as medical care expenses incurred due to hospitalisation.

Compensation offered is pre-decided while purchasing the plan, which is subject to the claim approval

Number of Claims Allowed

Multiple claims

Single death claim. But this may vary based on the insurance riders chosen and the terms of the policy.

Renewability Option

The insurance plan can be renewed annually.

Renewability is not applicable.

Type of Risk

Risks include accidents, calamities, fire, explosions, burglary, healthcare emergencies, etc.

Risk includes the death of the insured.

Number of Policyholders Under a Single Plan

Policyholders can be more than one depending on the type of policy.

The policyholder can be more than one based on the plan.

Examples

Home insurance, health insurance, travel insurance, etc.

Term insurance, endowment insurance, money-back insurance policy, etc.

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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FAQs on Difference Between Insurance and Assurance

  • ✔️What is the difference between insured and assured?

    Insured is a term mostly used for non-life insurance plans where compensation is offered for loss. Whereas, assured is a term used for life insurance policies where a pre-determined sum is paid out in case of the policyholder’s death.

  • ✔️What should I do if I want to sell my car with a FASTag attached?

    The various types of insurance plans are health insurance, life insurance, travel insurance, home insurance, motor insurance & property insurance.

  • ✔️What does beneficiary mean in life insurance?

    A beneficiary is a person who shall receive the sum assured amount under life insurance in the event of the policyholder’s death.

  • ✔️What are the types of health insurance plans available?

  • ✔️How many policyholders can be insured under health insurance?

    The family floater health insurance plan insures various family members under the policy such as your spouse, children, parents, etc. 

  • ✔️Do insurance plans offer tax benefits?

    Yes. Insurance plans offer tax benefits to policyholders, however, the tax deduction that one can claim shall vary based on the type of insurance policy chosen. Health insurance premiums can be claimed under Section 80D of the Income Tax Act, 1961. Moreover, the life insurance premiums can be claimed under Section 80C of the Income Tax Act, 1961.