Here are the differences between Insurance and Assurance used in Insurance Terminology
Insurance and Assurance are the most common terms used in the insurance terminology. These terms although mean the protection against certain perils are different in terms of coverage offered to the policyholder. These terms often create confusion among the general public and there is a need to understand the usage of these terms in particular to insurance industry.
The understanding and penetration of insurance has increased in the recent years due to the advent of technology and the increasing awareness among the customers. In the early years of insurance industry people used to depend heavily on the agents for their insurance purposes and get the information completely from the agents. Customers were at the mercy of the agents and this lead to the mis-selling of insurance products. But due to the increasing awareness created by the regulatory bodies common people have started to learn more about the insurance product and the terminology used in the insurance products.
Let us understand the difference between the insurance and assurance, where and when to use these words:
- Insurance guarantees the financial coverage in case of loss due to an insured peril or an uncertain event such as accident, hospitalization, fire damage etc. The uncertain event may or may not happen during the policy period. This uncertainty is covered under the term Insurance.
- Assurance guarantees the financial coverage in case of loss due to a certain event; such as death. The event is certain to happen at any time during the policy period where the coverage is applicable. The certainty of happening is covered under the term Assurance.
- Concept Used:
- Insurance is based upon the Principle of INDEMNITY i.e. the policyholder is compensated in such a way that he/she was just before the occurrence of the loss. In simple term, what is lost is replaced or compensated accordingly.
- Assurance products are known as the Benefit Products i.e. the policyholder or the beneficiaries are given the complete sum assured in case of occurrence of a certain event.
- Products type:
- Insurance term ins used for general insurance products such as Fire/Property insurance, Motor insurance, Health insurance , Marine insurance etc. Where the policy works on the principle of indemnity.
- Assurance term is used for Life and other allied insurance products such as Term insurance, Personal accident insurance etc. Where the policy words on the benefit basis.
- Claim Payout:
- In Insurance products, the claim payout is done on the basis of actual or sum insured whichever is lower. In the event of occurrence of a peril the claim amount paid to the policyholder will be the actual amount incurred or the sum insured specified, whichever is lower.
- In Assurance products, the claim is paid without taking into consideration of the incurred amount. In case of happening of a certain event such as death, the sum assured under the policy is paid to the beneficiary or nominee.
- Duration of cover:
- Insurance products typically have duration of one year after which they are renewed. The insurance products are the short term plans which have duration of maximum 3 years.
- Assurance products are offered for many years or a lifetime. The duration may run through the entire life of the insured.
- Premium Payment:
- Insurance products have the option of one time premium payment at the start of the policy period. In Motor insurance the premium is to be paid at the start of the policy period and is to renewed every year by paying premium.
- In Assurance products, the premium is paid periodically or a one time payment for life coverage can be made depending on the type of the policy. In life insurance the premium can be paid every year or half yearly or quarterly or monthly or specific period or one time.
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