Assurance or Insurance: Understanding Your Policies - School Contents

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Assurance or Insurance: Understanding Your Policies

As a beginner, you may be thrown into temporary confusion when you hear or read the term "assurance" instead of the "insurance", we're all used to.

Reading through the terms of the policy, the word "insurance" and "assurance" may come in which may get you, sometimes, more distracted.

Some people claim these words can be used interchangeably. That's wrong! This is because the term "insurance" and "assurance, even though are used by insurance companies, never means the same.

In this post, you'll be shown, using a few references, the difference between the two terms.

The Term Insurance is Associated With the Uncertainty of the Occurrence

When you buy some policies which include properties e.g. accident, home, burglary, repair, etc., the rightful term will be "insurance".

This is because these types of loss are not certain to happen during or at the end of the plan duration. There is no certainty that the policyholder will incur the loss and be compensated.

The company will only pay if you incur the loss. Otherwise, no matter the period of being in the policy, you'll not be paid. In short, compensation is strictly made if the loss happens.

Not only that, even if the loss happens, the company may not compensate if the holder has defaulted or breached any terms of the policy.

Let's look at the case of Mr. Smith who bought car accident insurance. The terms cover both the damage sustained by the car and the driver in an accident.

Conditions of this Insurance Plan

  1. Unless he has an accident, the car won't be repaired or replaced by the company. Even if the car is stolen, he won't be compensated as the policy's terms don't include theft.
  2. If before the accident, he has defaulted the payment of the premiums, for a period agreed not to default, the company will not compensate consequently.
  3. If he's been compensated once and still remains in the policy, by continually paying the premiums, he will still be compensated in the case of another accident in the future, as long as he is still in the policy with terms met.

The Term "Assurance" is Associated With Certainty of the Occurrence

The word assurance, in the insurance contract, is generally about life and death. That's most certain! Isn't it?

You're sure to come across this term if you opt in for policies like life insurance, disability insurance, term insurance, Endowment plans, etc.

In an assurance policy, the insurer and the assured are both aware and certain that death will happen in the foreseeable or unforeseeable future. The policyholders, if attain a certain age, are sure to face health issues or disabilities of certain kinds.

Hence, an assurance policy guarantees compensation whether the holder opt-out before the maturity of the policy (death) or when the policy matures.

Let's look at the case of Mrs. Smith who joined a company for a life insurance policy.

Conditions Of This Assurance Plan

  1. The premium is fixed and may be higher or lower based on the age of the policyholder. The younger the holder the less the premium in most cases.
  2. Compositions are to be paid, at the expiration of the plan, with the total savings (a larger part of) paid to her next of kin or if she exists the policy, while still alive, paid to her.
  3. And if she chooses to quit the contract, along the way, she may be paid up to the total premium paid (more or less like your savings to a bank).
  4. Assurance has only one-time expiration which usually never be subjected to any renewal for another compensation as the holder is likely already dead or incapable to continue with the policy
  5. Other terms may include being paid before death, if disabled, and up to the agreed sum or the total premium paid. 


It's safe to say if a policy guarantees compensation with or without the outcome, is ASSURANCE. If you're only compensated only on meeting the terms, before the expiration of a policy, it's INSURANCE.

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