Differences Between Insurance and Assurance
The terms insurance and assurance are used frequently in the financial industry. Insurance provides financial coverage for unforeseen circumstances surrounding an event, such as fire, theft, or flooding. Assurance provides coverage for events that will occur, such as death. A life insurance policy, for example, provides coverage to an individual for a specified period of time. If the individual dies during that specific period, the insurance carrier will pay the amount of money agreed upon in the contract. If the insured individual lives past the specified time period, the insurance policy becomes void, and the provider is not obligated to make any payment.
A life assurance policy will always result in a payment being made because the investment is combined with the sum insured. The value of the policy also increases with time because the investment bonus is added to the policy. Therefore, in the event of the insured dying, the policy would pay out the agreed-upon amount plus any bonuses that have accumulated since the policy took effect. If the policy is cancelled before the end of the specified period, the policy will retain some cash value, which relates to the investment portion bonuses. Most companies will issue penalties for cashing out on the policy before the specified time has ended.
Insurance companies usually offer both insurance and assurance policies, which tends to confuse most. Many life insurance companies offer a wide range of insurance and investment policies. These include investment funds, car insurance, pensions, investment bonds, life assurance, home insurance, and loans. Sometimes a life insurance company will brand itself a life ‘assurance’ company, but in this case, the two terms are used interchangeably.
Most companies in the financial service industry are aware of the confusion these two words are causing their customers. To counter this, companies now offer detailed guides to their customers containing information that satisfies customer needs and answers frequently asked questions. This has also led to an increase in the number of online guides and glossaries that offer specific information and comparisons between financial products. This information helps customers make more informed decisions when it comes to purchasing such financial products.