Insurance refers to protection against uncertain events like accidents, theft or catastrophes. Assurance refers to protection against certain events like death. Insurance policies compensate the holder if the uncertain event occurs. Assurance policies compensate beneficiaries when the assured person dies.
Key Differences Between Insurance and Assurance
Insurance covers property and people. Multiple claims may be permitted. Assurance covers death. Only one claim is permitted.
Premiums and Coverage
- Insurance premiums are based on the probability of an event occurring.
- Assurance premiums are pre-defined.
Duration and Payouts
- Insurance: Covers a specific term or period.
- Assurance: Provides lifelong coverage with a guaranteed payout upon death.
Investment Aspects
- Life assurance policies incorporate an investment component, providing a lump sum upon death.
- Life insurance is a term-based policy with no investment component, but with a potential payout upon death during the term.
Understanding these differences allows informed decisions when choosing appropriate financial products.
Life Insurance Versus Life Assurance
Term life insurance policies provide coverage for a set period of time, usually 10-30 years. Premiums are lower since coverage expires at the end of the term. Life assurance guarantees lifelong coverage. Premiums are higher but cover you until death.
With life assurance you pay more but are covered for life. With term life insurance, premiums are lower but coverage expires.