Two terms are commonly used in the financial market i.e. insurance and assurance. Usually, people get confused between these two terms as both of these terms are generally used in the insurance sector. However, there is a thin line difference between these two. Let's take a look at the differences between insurance and assurance in detail.
Insurance is defined as a contract between the insurance company (insurer) and the person who is buying the policy (policyholder). This contract states that the insurance company will compensate the policyholder in case of an unforeseen incident, medical and otherwise. This compensation is provided in exchange for a predefined amount i.e. insurance premium paid by the policyholder on a regular basis.
For example. Mr. Akhlag purchases a health insurance to obtain financial coverage for future medical emergencies for himself and his family. The health plan provides cashless and reimbursement hospitalization in the network hospitals. Now, if one day, Mr. Akhlag suffers a sudden heart attack and is taken to a network hospital of the health insurance company he has bought the policy from, his entire treatment would be cashless and he will not have to pay for any treatment in the hospital.
Insurance saves you from burning a hole in your pocket at the time of emergencies.
Assurance and insurance are very similar as they both provide financial protection. Assurance offers reimbursement of a predetermined sum amount in case of an unavoidable event such as death, disability, or when the policy tenure is over. This type of protection is usually offered in life insurance policies, which are further divided into three categories of Life Insurance: Whole Life Insurance, Term Life Insurance, and Annuity.
For example: Mr. Dewan bought an endowment plan with a sum assured of INR 50 Lakhs for himself. This type of policy offers two types of benefits. If Mr. Dewan survives the policy tenure then he will get the total lump sum amount from the insurance company. If Mr. Dewan dies within the policy tenure then the insurance company will pay the lump sum amount to the nominee of the policy.
Both insurance and assurance may sound similar, but they have very minute differences.
We at PolicyX.com are trying to show you the detailed differences between insurance and assurance in a tabular format:
|Category||General Insurance||Life Insurance|
|Objective||To compensate for the loss. For example, loss incurred during an accident, theft, fire, flood, etc.||To provide monetary support for a specific situation. For example, disability, death, a major illness, etc.|
|Types of Policies||Motor insurance, health insurance, home insurance, mobile insurance, etc.||Life insurance, term insurance, ULIP, endowment plans, etc.|
|Claim Payment||Claim amount is not pre-decided. It is Approx. equal to the amount of loss. For example: hospitalization bills, the cost of repairing/replacing vehicle parts, etc.||Claim amount is pre-decided for a specific event or situation. For example, a major illness like cancer, heart disease, the death of the policyholder, etc.|
|Number of Claims Allowed||Multiple||Only one|
|Renewability||On an annual basis||Not applicable|
|Coverage||Home insurance, health insurance, property insurance, motor insurance, etc.||Life, death, and disability cover.|
|Number of Insured||One or more people depends on the nature of the insurance plan.||It includes only one person in the account|
|Nature of Risks||Unpredictable risks like fire, accidents, etc||Usually uncertain but predictable risks like death|
|What is Insured?||People and/or property||People|
Buying an insurance policy ensures that the insurance company will assist you financially in the event of a loss or damage to you or your property under general insurance, and you will receive a good return on the maturity of the policy under life insurance or term insurance and in the event of your death, the nominee will receive the sum insured amount.
Insurance industry professionals also recommend that you should buy your insurance policy online because it will be more cost-effective and helpful to you than buying it offline. You will save money on an insurance agent if you purchase the policy by yourself, and you will be able to discover more about the plan. Apart from this, you can compare different plans and premium rates from the convenience of your own home.