Assurance and insurance are two different concepts that are often misunderstood. While their functions may appear similar, there are some key differences between the two to be aware of. In this article, we will explore the differences between assurance and insurance, and some of the uses of each.
What is Assurance?
Assurance is a form of financial protection in which an individual or business agrees to pay a designated amount of money in the event of a certain specified occurrence. The purpose of assurance is to minimize the risk of a financial loss, or to protect the value of an asset or property. Assurance contracts are usually long-term agreements, and the amount of money to be paid out is generally non-refundable.
What is Insurance?
Insurance is a form of financial protection in which an individual or business agrees to pay a specified amount of money in the event of a designated loss or injury. Unlike assurance, insurance contracts are usually short-term agreements, and the money to be paid out is typically refundable. In addition, insurance contracts are usually tailored to the specific needs of the insured, and the amount of money to be paid out is often determined by a number of factors, such as the value of the asset or property, the type of injury or loss, and the amount of risk associated with the insured.
Differences between Assurance and Insurance
The most notable difference between assurance and insurance is the length of the contract. Assurance contracts are usually long-term, while insurance contracts are usually short-term. In addition, the amount of money to be paid out in an assurance contract is generally non-refundable, while the money to be paid out in an insurance contract is typically refundable.
Uses of Assurance
Assurance is typically used to protect the value of an asset or property. For example, an individual may purchase an assurance contract to protect their home from damage due to natural disasters. Similarly, a business may purchase an assurance contract to protect their office building from damage due to fire or vandalism.
Uses of Insurance
Insurance is typically used to protect an individual or business from financial losses due to injury or damage. For example, an individual may purchase an insurance policy to cover medical expenses related to an injury. Similarly, a business may purchase an insurance policy to cover losses due to theft or fire.
Conclusion
It is important to understand the differences between assurance and insurance, as well as the uses of each. Assurance is typically used to protect the value of an asset or property, while insurance is typically used to protect an individual or business from financial losses due to injury or damage. By understanding the differences between assurance and insurance, one can make informed decisions regarding their financial protection needs.