Question

Distinguish between Insurance and Assurance.

Answer 1

In practice, the terms insurance and assurance are used interchangeably. But strictly speaking, there is a technical difference between the two. The term 'insurance' means that compensation is payable only on the occurrence of an event which may or may not happen. In the case of fire insurance and marine insurance, compensation becomes payable only when the insured property is destroyed or damaged by fire or sea perils. If no such destruction or damage takes place,, no compensation is payable. But the term 'assurance' means the contract which assures the payment of a certain sum on the happening of an event which is certain. In the case of life insurance, the insured amount is payable on the death of the insured or on the expiry of the specified period, whichever is earlier. The amount is payable sooner or later and only the time of payment is uncertain.