This document discusses the key differences between insurance and assurance. Insurance is a contract where the insurer agrees to pay a fixed amount if a specified event occurs, like death or property damage, in exchange for premiums. Assurance guarantees payment of a sum upon an event that will inevitably happen, like death or reaching a certain age. The main differences are that losses under insurance are uncertain while assurance covers certain losses, insurance covers property/goods while assurance covers human life, and assurance policies can be surrendered while insurance policies cannot.
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Insurance & assurance
1. Topic Presented by
Dr. L. ESWARAN, M.Com., COA., PGDCA., M.Phil., MBA., Ph.D.,
Assistant Professor,
PG & Research Department of Commerce,
Thiagarajar College,
Madurai – 625 009.
2. At the end of this module you will be
able to:
- Know the meaning and definition of the
terms Insurance and Assurance.
- Differentiate the term Insurance from
Assurance.
3. Insurance is a form of contract between two
parties (namely insurer and insured or assured)
whereby one party (insurer) undertakes in
exchange for a fixed amount of money
(premium) to pay the other party (Insured),
a fixed amount of money on the happening of
certain event (death or attaining a certain age in
case of life) or to pay the amount of actual loss
when it takes place through the risk insured (in
case of property)
4. ‘Assurance’ is used in those contracts which
guarantee the payment of a certain sum on
the happening of a specified event which is
bound to happen sooner or later.
For example attaining a certain age or
death.
Thus life policies come under ‘assurance’.
5. Basis of Distinction: Certainty
Insurance:
In the case of insurance, loss due to risk is
not certain to happen. Loss i.e., likely to
happen or not.
Assurance:
Loss due to risk is certain to happen. Risk of
death is bound to happen sooner or later.
6. Basis of Distinction: Subject Matter
Insurance:
Generally, goods or property of any other
kind are the subject matter of non-life
insurance.
Assurance:
Human life is the subject matter of life
insurance contract.
7. Basis of Distinction: Term of contract
Insurance:
Insurance contract is usually for one year.
Assurance:
In the case of life insurance contract, the
contract is a continuing contract, i.e., long
term contract.
8. Basis of Distinction: Contract of indemnity
Insurance:
Fire, Marine insurance and other contracts are
contract of indemnity.
Assurance:
It is not contract of indemnity.
9. Basis of Distinction: Insurable Interest
Insurance:
In Fire Insurance, insurable interest must be approved
both at the time of policy is effected and at the time
when loss occurred.
In Marine Insurance, it must be present only at the
time of loss occurring. It is not necessary at the time
of effecting the policy.
Assurance:
Insurable interest must be present only at the time of
taking out the policy, but need not have insurable
interest at the time of maturity of the policy.
10. Basis of Distinction: Insurance / Assurance
Insurance:
The term ‘Insurance’ is used to other kinds of
non-life insurance contracts.
Assurance:
The term ‘Assurance’ is referred only to Life
Insurance business.
11. Basis of Distinction: Surrendering the policy
Insurance:
In the case of marine and fire insurance, the
policy cannot be surrendered by the insured
before its maturity.
Assurance:
In life the insurance policy can be
surrendered by the assured before its
maturity.
12. Basis of Distinction:
Elements of Protection and/or Savings
Insurance:
In the case of fire and marine insurance,
insurance contain only the protection
elements.
Assurance:
Life Insurance contains both Protection and
Savings elements.
13. Insurance is a contract between two parties
Insurer and Insured person.
Assurance is a contract which guarantee the
certain amount on the happening of certain
event.
Difference between Insurance and Assurance
On the basis of
Certainty
Subject Matter
Term of contract
14. Contract of Indemnity
Insurable Interest
Insurance / Assurance
Surrendering the Policy
Elements of Protection and Savings
