Insurance vs Assurance: All You Need To Know

Know the key differences between insurance and assurance, their advantages and disadvantages.
Check Our Health Insurance Plans
Get Quote
3 min
19-January 2024

Insurance and assurance are two terms that are often used interchangeably. While they both involve financial protection, there are fundamental differences between the two. This article aims to unravel the nuances between insurance and assurance, exploring their meanings, differences, and the advantages and disadvantages associated with each. This article talks about the differences between life insurance and life assurance and provides you with a comprehensive understanding of these financial safeguards.

What is the meaning of insurance?

Insurance is a financial product that provides financial protection against uncertain future events. It is a contract between the insurance company and the policyholder, in which the company agrees to pay a predetermined amount of money in case of a specific event, known as the policy event. The policyholder pays a premium to the insurance company, and in turn, the company agrees to bear the financial risk in case of the policy event. Insurance products include life insurance, health insurance, automobile insurance, and property insurance.

What is the meaning of assurance?

Assurance, on the other hand, is a financial product that provides financial protection for a certain event that is bound to happen, which is usually death or maturity. Assurance contracts are long-term contracts, and the premium paid is invested by the company and accumulates over time. At the end of the contract term, the policyholder receives a lump sum amount regardless of whether the policy event has occurred or not. Assurance products include life assurance, endowment assurance, and annuity assurance.

Difference between insurance and assurance

Aspect Insurance Assurance
Term Typically short-term, covering a specific period. Long-term, often covering the entire life of the insured or a specified term with assured benefits.
Event triggering payout Event-based, triggered by specific incidents (e.g., accidents, illnesses, property damage). Event-based but with a guaranteed payout, usually linked to the insured's death or the maturity of the policy.
Nature of risks covered Covers a range of risks based on the policy type (e.g., health insurance, property insurance). Primarily focused on life-related risks, such as death or survival to a certain age (as in endowment policies).
Payout certainty Not guaranteed; contingent on the occurrence of specified events. Guaranteed payout, either upon the insured's death or at the end of the policy term (maturity benefit).
Flexibility Relatively flexible, allowing for customisation based on the insured's needs. Less flexible, as the terms and benefits are predetermined, offering a more structured approach to financial protection.


Check out the benefits of health insurance in India.

Advantages and disadvantages of insurance

Advantages:

  • Risk mitigation: Insurance provides a crucial safety net by mitigating financial risks associated with unforeseen events.
  • Financial security: Policyholders gain financial security by knowing that they are protected against specified risks.
  • Customisation: Insurance policies are often customisable, allowing individuals to tailor coverage based on their specific needs.

Disadvantages:

  • Premium costs: Insurance premiums can be a financial burden, especially for comprehensive coverage, leading to ongoing expenses.
  • Policy limitations: Some policies have limitations on coverage, exclusions, or waiting periods that may affect immediate access to benefits.
  • Claim approval challenges: The claims process may be complex, and disputes over coverage may arise, leading to delays in payouts.

Advantages and disadvantages of assurance

Advantages:

  • Guaranteed payout: Assurance policies offer a guaranteed payout, providing certainty to the insured and their beneficiaries.
  • Long-term protection: Assurance policies often provide coverage for an extended period, offering long-term financial security.
  • Structured approach: The predetermined nature of assurance policies provides a structured approach to financial planning.

Disadvantages:

  • Premium commitment: Premiums for assurance policies can be relatively higher, reflecting the guaranteed payout and long-term nature of coverage.
  • Limited flexibility: Assurance policies may offer limited flexibility compared to insurance, as benefits and terms are predetermined.
  • Complex products: The intricacies of some assurance products may be challenging to understand, requiring careful consideration before purchase.

Insurance and assurance are two financial products that offer financial protection in different ways. Insurance provides protection against uncertain events that may or may not happen, while assurance provides protection against events that are bound to happen. While both products have their advantages and disadvantages, it is essential to choose the product that suits one's financial goals and lifestyle. It is also advisable to read the policy documents carefully and understand the terms and conditions before signing up for any insurance or assurance product.

Frequently asked questions

What is the difference between insurance and assurance?

Insurance and assurance are two terms that are frequently used in the financial industry, but they refer to different products. Insurance is a type of financial product that provides protection against specific risks. This type of insurance could cover life, property, health, or other types of assets. Assurance, on the other hand, is a type of financial product that typically provides long-term protection. This type of product is often used for investments and retirement planning, and includes products such as annuities.

How do these financial products differ in their coverage?

Insurance products generally provide short-term coverage for specific risks, while assurance products provide long-term coverage that can include investments or retirement planning. Insurance policies also have a specific payout amount, while assurance products often have a variable payout that is impacted by various market factors.

What kinds of insurance products are available?

Insurance products can include life insurance, health insurance, auto insurance, property insurance, liability insurance, and more, depending on the needs of the individual or business.

Disclaimer

Insurance is the subject matter of solicitation. *T&C Apply - Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third-party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited, Future Generali Life Insurance Company Limited, Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Limited, ICICI Lombard General Insurance Company Limited, HDFC ERGO General Insurance Company Limited, Tata AIG General Insurance Company Limited, Niva Bupa Health Insurance Company Limited , Aditya Birla Health Insurance Company Limited, Manipal Cigna Health Insurance Company Limited and Care Health Insurance Company Limited under the IRDAI composite CA registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. Please refer insurer's website for Policy Wordings. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure carefully before concluding a sale. Tax benefits applicable if any, will be as per the prevailing tax laws. Tax laws are subject to change. Tax laws are subject to change. BFL does NOT provide Tax/Investment advisory services. Please consult your advisors before proceeding to purchase an insurance product. Visitors are hereby informed that their information submitted on the website may also be shared with insurers. BFL is also a distributor of other third-party products from Assistance Services providers such as CPP Assistance Services Pvt. Ltd., Bajaj Finserv Health Ltd. etc. All product information such as premium, benefits, exclusions, sum insured, value added services, etc. are authentic and solely based on the information received from the respective insurance company or the respective Assistance service provider company.

Note – While we have made all efforts and taken utmost care in gathering precise information about the products, features, benefits, etc. However, BFL cannot be held liable for any direct or indirect damage/loss. We request our customers to conduct their research about these products and refer to the respective product’s sales brochures before concluding their sale.