Considering the current trend of uncertain occurrences, most people are moving towards purchasing financial products that cover them through such periods.
However, only a few of these prospective consumers know of the difference between these products.
Knowledge of the same enables one to purchase a product that is not only fit for them but also one that is tailored towards the sole purpose of the purchase.
The most common terms used in the financial industry are Assurance and Insurance.
Most people use these two words in place of the other, whereas they refer to totally different policies.
As similar as they maybe, they are two different products sold in the market offering more or less the same thing.
Assurance refers to a financial product where the insurer ought to provide remuneration for an occurrence that is bound to happen, for instance death.
Insurance on the other hand refers to a policy that guarantees financial coverage in case of loss that is a result of an uncertain event that is not guaranteed to happen, for example, fire or theft.
Further, unlike insurance which offers coverage for occurrences such as hazards over a particular policy term, Assurance offers permanent coverage over an extensive period and mostly death.
Most insurance companies offer both products alongside each other which can be a little confusing to the prospective clients.
Expansive knowledge of these products could go a long way towards ensuring that they understand the difference-making it easier for them to purchase the product that meets their need fully.
We take a look at the differences between Assurance and Insurance.
- Period/ Duration
The duration for an Assurance policy is a long term meaning it is over an extended period or until death and not subject to much change.
However, an Insurance policy runs over a shorter time i.e. one year or so and is subject to renewal.
Due to the flexibility of the insurance policy, there is room for an upgrade if need be, or adjustment to fit the desired need of the customer.
For instance, in case one has insured their office against robbery for one year and within that year they have invested more on the office assets, they can choose to upgrade the policy during renewal to fit their current asset value.
Assurance offers a risk prevention solution, benefits, and securing of financial coverage for losses incurred during a certain event.
For instance, in cases of death, the beneficiary is paid if the holder of the policy passes on during the agreed tenure.
The Insurance policy is taken to prevent risk and cover the holder financially in case of losses incurred during the occurrence of an uncertain event like a robbery or fire.
The main goal of an assurance policy is to pay the assured sum after the occurrence of the event, whilst an insurance policy seeks to reinstate the holder’s financial stability without incurring losses after the insured event.
Assurance falls under life insurance policy based on the principle of indemnity meaning that one way or another the said event is bound to happen and will happen whereas Insurance falls under the policies of general insurance based on the principle of certainty in the sense that the occurrence may or may not happen.
In Assurance, payment is guaranteed to be made because the event is certain and bound to happen whereas an insurance payment is not guaranteed since it is coverage of an event that can happen but not necessarily bound to happen.
Assurance against death is certain since it is an occurrence that will happen at one time; however, it is not certain that your business will catch fire just because it is insured against the occurrence.
Therefore, this relies on the probability and coverage in case it happens.
Insurance aims at shielding the insured against any identified risk while the main purpose of Assurance is to assure payment of the beneficiary when the said event happens.
The Insured must pay their premiums at a particular time and intervals to receive indemnity and coverage against risks while Assurance expects the assured to pay the premiums on time for them to receive benefits upon maturity of the policy.
Money that is paid to the assurance company is normally reinvested in other financial platforms and instruments, therefore, earning returns at the end of the policy-making it more valuable.
The interest generated is then accumulated and added to the investment capital that is payable to the beneficiary at the end of the policy tenure.
On the contrary, money received by the insurance company is not reinvested or channeled to any financial instrument therefore there are no extra returns or bonuses and the only amount payable is what is insured against the occurrence or property.
To sum up this article, Assurance and Insurance are very important policies that are worth investing in.
They are however very similar products, and yet so different.
There is a very thin line that distinguishes these two financial policies as covered in this article.
It is further advisable that one consults a financial advisor while intending to purchase a policy.
This will ensure that you get the ideal product that is fit for your needs.
It is also advisable that you scan through various policy providers to see what different insurance companies have to offer.
This helps you compare different rates, privileges and benefits offered by various providers therefore gauging the best bargain for you.
Experts advise that you do that before committing to sign the insurance or assurance contract.
It helps to make informed decisions on the same.
Before signing the policy document whether it’s an Assurance or Insurance document ensure that you have read the document carefully.
Also, ensure and you are familiar with every detail in the contract.
Ensure that you understand all the clauses including the terms and conditions.
Once you have finalized with it, ensure that you keep the document safely.