Difference between Insurance and Assurance

Insurance is a risk pooling, transfer and share mechanism by which losses of few is shared among many. It is a pretty old concept dated back to 4000-3000 BCE in form of bottomry contracts used by merchants of Babylon. From that time till this date the sector has seen major shift in developments in terms of coverage, wordings, products and risk management.

Today it is considered as a major sector in the economy of every country across the globe which is of prime importance in supporting the economy in case of major losses by man-made and natural perils. After the launch of government insurance schemes in India and the state promoting insurance at large, there will be very less number of people who have not heard about this and do not have even a single insurance policy purchased anytime in their name.

Although the concept of insurance which makes the damage or loss suffered by the policyholder good as per the terms of the policy is broadly clear in the minds of people, the term assurance is a lesser known one. We often hear the word insurance and assurance interchangeably in place of each other to signify the mechanism of insurance, but there exists some point of difference between the uses of two words, we will discuss the same in the current article.

As the words insurance and assurance have very closer meaning different people have different perceptions about where which word should be used in insurance parlance. Also there may be some difference in interpretation of these words among different people.


  • One interpretation is insurance offers coverage for a specific policy term i.e. limited time which is annual in most of the products but may vary to a longer and extend up to 20-30 years in some cases whereas assurance provides continuous coverage for extended and longer periods. Insurance policies in its true sense will be for shorter periods and assurance policies will be for longer periods.


  • Insurance basically grants coverage for risk that is unforeseen and uncertain which is specified clearly in the policy for example in health insurance there will be an exclusion or waiting period for pre-existing diseases where there are chances and higher probability of getting a claim. In other indemnity based policies like motor and engineering insurance for example there will be always coverage for unforeseen circumstances and accidental damage. In benefit based policies like personal accident only unforeseen accident is covered any planned situation or willful misconduct of or in the knowledge of the insured will not be covered in any case.


Assurance provides coverage for events or circumstances for which the exact time and date of occurrence is unknown but the event someday is bound to happen for instance death.


  • Insurance products will be typically general or non-life insurance products while assurance products are some life insurance products. We will illustrate some of the life assurance and insurance product which will further highlight the difference between the two.

Whole life assurance: Under this type of product sum insured is payable to nominee of the policy on the death of the insured. Here cover is provided for the entire life of the policyholder and hence a certain event is getting covered. The policyholder has to die someday in whatever age and the whole life insurance will definitely trigger that day.

Term life insurance: This is an insurance product. Although in this product the term is for longer periods but generally it covers the policyholder up to a maximum age limit say 80 years. The policyholder may or may not die in this period. Thus we can say that this product is not covering a certain event which is bound to happen.

When we compare the above two products we see that assurance policy will cover an event that will surely happen no matter what, whereas an insurance policy will cover an incident that might occur within the policy period.

Annuity: Annuity products are basically pension products sold by life insurance companies which will pay money to the insured in instalments till he is alive. Here also the insurer is selling assurance to the policyholder that he will be depositing money in the bank account of the policyholder on the specified date as per the terms and condition of the policy.

  • Assurance can also be referred to a host of services provided by professionals like accountants, lawyers and other similar ones also commonly known as assurance service, the reader needs to take a note of this as well to avoid the confusion if he encounters the term in this parlance. These services are called assurance services because the professional ensures himself and assures the client of the confidentially, integrity and usability of the documents and files he receives for performing the services. Audit can be a good example of assurance services where the auditor company assures the client of the same.

Last but not the least here I want to reiterate again that insurance and assurance have very closer meaning and are often used one in place of another as synonyms neglecting the subtle nuances in the detailed meaning of the same.

The reader should not get confused when he sees the name of a life insurance company as Life insurance Corporation of India and the name of a general insurance company as the new India assurance company limited.





IC – 01 Principles of Insurance – MCQ’s: Licentiate Exam



MCQ’s on Life Insurance Licentiate Exam: IC 01 / IC 02 / IC 14 (Total 300)



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