Simplifying Life Insurance in India
What Are the Differences Between Insurance and Assurance?
What Is Insurance?
What Is Assurance?
An assurance policy is somewhat similar to an insurance policy, apart from the fact that your nominee will receive the exact amount they have decided. However, they can only claim the policy upon your demise.
Now that you have got a clear idea about both, you must proceed to find out the insurance vs assurance differences, to clearly highlight their individual benefits.
What Are the Differences Between Insurance and Assurance Policies?
The differences between insurance policies and assurance policies are as follows:
|
Point of Comparison |
Insurance Policies |
Assurance Policies |
|
Purpose |
To provide financial protection during any unfortunate situation. |
To provide financial protection to a nominee after death of the policyholder. |
|
Principle |
Based on Principle of Indemnity |
Based on Principle of Certainty |
|
Coverage Against |
Health, property and vehicles |
Life and death of policyholder |
|
Risk Type |
Theft or natural calamities |
Sudden death |
|
Event Type |
Unanticipated event |
Definite event |
|
Type |
General insurance |
Life insurance |
|
Products |
Medical insurance, property insurance, and two and four-wheeler insurance |
Life insurance, term insurance, and ULIP |
|
Renewability |
Every year or on expiry of the policy |
Not applicable in this case |
|
Number of Claims Available |
More than once |
Only once |
|
Claim Amount |
Equal to the amount of damage that has occurred |
Pre-decided by the insurer and policyholder |
|
Duration |
Short-term |
Long-term |
|
Number of Insured |
One or more |
Only one |
|
Person Who Can Raise a Claim |
Policyholders can raise a claim |
Only nominee can raise a claim |
|
Cost of Premiums |
Low |
High |
|
Usage of Claim Amount |
Only for damage repair or financing treatment |
There is no restriction on the usage of the money |
What Are the Advantages of Insurance Policies?
The advantages of insurance policies are as follows:
- At times you can raise more than one claim on your policy.
- You can renew this policy every year to prevent its expiry and continue to enjoy the benefits with a single policy.
- You will only have to pay a little extra to renew a plan on its expiry.
- Policyholders can enjoy tax benefits on the premiums of these policies, ensuring sumptuous savings on the same.
- You can also benefit from a No Claim Bonus (NCB) if you do not raise a claim in a single year.
However, there are several advantages of assurance policies as well.
What Are the Advantages of Assurance Policies?
Following are the advantages of assurance policies:
- You can get tax benefits, maturity benefits and death benefits on some of the types of insurance policies like TROPs, endowment plans and ULIPs. This allows you to save substantially on the premiums and the claim amount.
- Your loved ones stay financially protected after your untimely demise.
- Your nominee can use the sum assured to furnish their current lifestyle, accomplish future goals, and pay off any liability.
- The nominee will receive a sum assured that you have negotiated with your insurer at the time of purchasing the policy,
However, only knowing the difference between insurance and assurance policy and the advantages of each is not enough to make the right choice. You must also consider their disadvantages and your actual requirement while selecting the appropriate policy.
FAQs About Insurance and Assurance
What are the disadvantages of insurance policies?
What are the disadvantages of assurance policies?
How to select the most appropriate policy?
Which sections of the Income Tax Act offer exemptions on assurance policies?
What are the different types of insurance?
What are the different types of assurance policies?
How does an insurance policy work?
How does an assurance policy work?
Why is life insurance often called life assurance?
How does the principle of indemnity apply differently to insurance and assurance policies?
What is the difference between the sum assured of an assurance policy and an insurance policy?
The sum assured of an assurance policy, like whole life insurance or endowment plans, is a guaranteed amount paid to your beneficiaries if you pass away or when the policy term ends. It ensures financial support for your loved ones no matter what.
The sum insured of an insurance policy is the maximum amount you can claim for a loss, such as damage to your car or home. It depends on the actual cost of the damage. Assurance provides a fixed payout for specific events, while insurance compensates for specific losses up to a set limit.
What factors influence the cost of premiums in insurance versus assurance policies?
Premiums for insurance (covering health, auto, and property) depend on coverage type, amount, term, personal risk factors (age, health, claims history), location, and additional options.
For assurance (like life insurance), premiums depend on the guaranteed payout, the policyholder's age and health, and policy duration. Assurance policies often have higher premiums because they provide a guaranteed payout.
What's the difference between short-term insurance and long-term assurance?
Choosing short-term renewable insurance policies, like health or auto insurance, offers flexibility to update or change coverage annually. However, premiums can vary each year based on factors like age, health, and claims history.
Long-term assurance policies, like life insurance, provide coverage for a longer period or for life, with fixed premiums. This gives stability and peace of mind, but often at a higher initial cost. In short, insurance offers flexibility, while assurance offers stability and guaranteed coverage.
How does the claim process vary between insurance and assurance policies regarding who can raise a claim and how it is managed?
In insurance policies, the policyholder directly raises a claim with the insurer when covered events like accidents or property damage occur. The insurer evaluates the claim, verifies the details, and then provides financial compensation as per the policy terms.
In assurance policies, such as life insurance, the nominated beneficiary raises the claim upon the insured person's death or other qualifying events like terminal or critical illness if covered. The beneficiary submits the required documents to the insurer, who then verifies the claim and disburses the predetermined sum assured to the beneficiary.
What are the considerations for beneficiaries when receiving benefits from insurance policies versus assurance policies?
Insurance policy beneficiaries typically need to file a claim with the insurer after an event like an accident or damage occurs. The insurer reviews the claim and compensates the beneficiary for the financial loss incurred due to the covered event.
In contrast, beneficiaries of assurance policies, such as life insurance, receive a predetermined sum assured upon the insured person's death. They notify the insurer of the death, provide necessary documentation like a death certificate, and receive the guaranteed payout upon verification.
Why should you buy insurance?
What's the difference between 'assured' and 'insured'?
When is it better to opt for insurance instead of assurance?
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Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
Disclaimer
