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Difference Between Insurance and Assurance
In India, a lot of people tend to depend on a middleman, like an agent, to help them buy their insurance policies. Not to overwhelm you, but this probably could be because of the insurance documentation having a lot of jargon, isn't it? If you are somebody who is learning the basic terminology of insurance and wondering what assurance and insurance difference is, you have come to the right page. This page explores the common terms 'insurance and assurance' meanings, assurance versus insurance, and more. So, keep reading!
What is the Meaning of Insurance?An insurance is a financial contract between the insurance company (insurer) that is authorised to provide insurance and the policyholder that ensures the policyholder will be compensated by the insurer in the event of a stated loss or damages caused by unforeseen events in return for a premium. The amount of compensation will roughly match the loss's monetary value.
The insurance policy document contains all the information about the kinds of damages that your insurance will cover and the related terms and conditions. It also shows the highest coverage amount that the insurer will provide you in the event of an unfortunate incident.
Insurance policies typically have a set duration of validity during which the insurer is responsible for paying benefits in accordance with the policy's terms and conditions. This is the period of the policy. Having insurance provides you with peace and a sense of being secure at challenging times such as theft, accidents, and natural disasters. All you need to do is pay a premium, which will provide safety coverage for yourself as well as your loved ones.
For instance, consider Gaurav purchased a new car. He got third-party insurance for his car. Third-party insurance is minimum mandatory insurance required by the Government of India who drives car. Its coverage includes payments for death or severe injury to other people, damage to their property or car, and other risks associated with driving.
He further buys an own damage add-on for his car to have more comprehensive coverage. With this add-on, he can claim any damage that may occur to his own. This may include an accident, fire, theft, or any natural disaster.
Other examples of insurance include health, travel, house, and property insurance.
Unlike general insurance, assurance is mostly related to term and life insurance. Although assurance and insurance are frequently used in tandem, assurance is more explicitly concerned with offering long-term security against unforeseen events like death or disability. In assurance, you and the insurer have a contract that focuses on providing long-term security against some future event-such as death-that will inevitably occur.
In this, the policyholder is certain to receive payment/compensation in the event that a particular event occurs. For example, a disability or death. In comparison to general insurance policies, these plans often have a longer validity period.
Given that it typically ensures a specific amount or benefits, this can be quite beneficial if you are the family's primary provider. In the event of your untimely death, while your policy is in effect, the insurance provider will pay your family members a predetermined amount. This amount can help them in meeting their daily necessities as well as the educational and medical costs of their parents.
Abhi, for example, has a young brother and old parents to take care of. For both immediate and long-term needs, such as monthly payments, prescription drugs, his brother's schooling, and more, they depend on Abhi's salary.
To protect his family, he purchases term insurance, whose maturity is 30 years and provides a Rs. 30 lakh assured payout. But regrettably, Abhi dies after 26 years of policy purchasing. But due to the term insurance he bought, his family is helped financially, which is like a lifesaver at this time of loss and uncertainty.
Parameter | Insurance | Assurance |
Definition | An insurance is a financial contract between the insurance company and the policyholder that ensures the policyholder will be compensated by the insurer in the event of a stated loss or damages caused by unforeseen events in return for a premium. | Assurance is a contract between you and the insurer that focuses on providing long-term security against some future event, such as death. |
Goal
| To make up for the loss. For instance, losses caused by event such as theft, flooding, fire, and accidents. | To provide financial assistance in a certain circumstance. For instance, death or disability. |
Policy types | Car insurance, two-wheeler insurance, travel insurance, house insurance | Term insurance, life insurance, unit linked insurance plan |
Total number of claims permitted | Multiple | One |
Types of risks included | Unknown risks such as theft, fire, burglary, and accidents | Usually covers disability or death |
Claim payment | Roughly equal to the sum of the loss. For instance, the expense of hospital stays, car maintenance or replacement costs, and so forth. | Predetermined sum to cover a specific event. For instance, the policyholder's death |
Renewal frequency | Typically, once a year or whenever the policy ends | Not relevant |
Why is Insurance So Important?
Policies for both general and life insurance can be useful for specific situations. Insurance offers much-needed financial support to cover the costs in the event of an unfortunate incident.
Consider health insurance. The severity of a medical condition determines how much it will cost to treat it. If the individual does not have insurance or another form of financial security, this could be a financial burden. In addition, if a patient does not receive prompt, high-quality therapy, their condition may get worse. An insurance plan in such a situation shields against unforeseen liabilities and allows for prompt medical attention. Therefore, having insurance is crucial.
ConclusionIn a nutshell, terms like assurance and insurance come in handy while understanding the insurance jargon, especially when choosing general insurance or even other types of insurance. They help protect your financial resources, and they serve different functions. By understanding the different concepts of insurance, you can make informed choices while picking insurance as per your needs.
FAQS
What distinguishes life assurance from life insurance?
Both assurance and life insurance offer coverage following the insured person's passing. While life assurance offers coverage for the entirety of your life, life insurance is valid for a predetermined amount of time.
Which is preferable, assurance or insurance?Assurance and insurance have distinct functions. Depending on the type of policy-life or general insurance, for example-your plan benefit will take the shape of an assurance or insurance.
What makes having a life insurance policy essential?A larger payout is offered by life insurance policies in the event of disability or death. These serve as the family's last line of defence financially if the main earner passes away or becomes disabled. With the support of this money, children can finish their education and become financially independent. Even in the event that the primary breadwinner is confined to bed and unable to work, the household can manage financially. Therefore, having life insurance is essential.
Can a claim be rejected for life insurance?The insurance provider has the right to reject a claim. This typically occurs when a claim is made in violation of a policy exception or when fraudulent claims are made. For instance, if suicide was specifically included as an exclusion in the insurance contract and the insured passed away committing suicide, the insurer may deny a claim. To prevent claim rejection, it is crucial to review all of the conditions of the policy of insurance.
Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.
