Topic Presented by

Dr. L. ESWARAN, M.Com., COA., PGDCA., M.Phil., MBA., Ph.D.,

Assistant Professor,
PG & Research Department of Commerce,
Thiagarajar College,
Madurai – 625 009.
 At the end of this module you will be
able to:

- Know the meaning and definition of the

terms Insurance and Assurance.

- Differentiate the term Insurance from

Assurance.
 Insurance is a form of contract between two
parties (namely insurer and insured or assured)

 whereby one party (insurer) undertakes in

exchange for a fixed amount of money
(premium) to pay the other party (Insured),

 a fixed amount of money on the happening of

certain event (death or attaining a certain age in
case of life) or to pay the amount of actual loss
when it takes place through the risk insured (in
case of property)
 ‘Assurance’ is used in those contracts which
guarantee the payment of a certain sum on
the happening of a specified event which is
bound to happen sooner or later.

 For example attaining a certain age or

death.

 Thus life policies come under ‘assurance’.

 Basis of Distinction: Certainty

 Insurance:
 In the case of insurance, loss due to risk is
not certain to happen. Loss i.e., likely to
happen or not.

 Assurance:
 Loss due to risk is certain to happen. Risk of
death is bound to happen sooner or later.
 Basis of Distinction: Subject Matter

 Insurance:
 Generally, goods or property of any other
kind are the subject matter of non-life
insurance.

 Assurance:
 Human life is the subject matter of life
insurance contract.
 Basis of Distinction: Term of contract

 Insurance:
 Insurance contract is usually for one year.

 Assurance:
 In the case of life insurance contract, the
contract is a continuing contract, i.e., long
term contract.
 Basis of Distinction: Contract of indemnity

 Insurance:
 Fire, Marine insurance and other contracts are
contract of indemnity.

 Assurance:
 It is not contract of indemnity.
 Basis of Distinction: Insurable Interest

 Insurance:
 In Fire Insurance, insurable interest must be approved
both at the time of policy is effected and at the time
when loss occurred.
 In Marine Insurance, it must be present only at the
time of loss occurring. It is not necessary at the time
of effecting the policy.

 Assurance:
 Insurable interest must be present only at the time of
taking out the policy, but need not have insurable
interest at the time of maturity of the policy.
 Basis of Distinction: Insurance / Assurance

 Insurance:
 The term ‘Insurance’ is used to other kinds of
non-life insurance contracts.

 Assurance:
 The term ‘Assurance’ is referred only to Life
Insurance business.
 Basis of Distinction: Surrendering the policy

 Insurance:
 In the case of marine and fire insurance, the
policy cannot be surrendered by the insured
before its maturity.

 Assurance:
 In life the insurance policy can be
surrendered by the assured before its
maturity.
 Basis of Distinction:
Elements of Protection and/or Savings

 Insurance:
 In the case of fire and marine insurance,
insurance contain only the protection
elements.

 Assurance:
 Life Insurance contains both Protection and
Savings elements.
 Insurance is a contract between two parties
Insurer and Insured person.
 Assurance is a contract which guarantee the
certain amount on the happening of certain
event.
 Difference between Insurance and Assurance
 On the basis of
 Certainty
 Subject Matter
 Term of contract
 Contract of Indemnity
 Insurable Interest
 Insurance / Assurance
 Surrendering the Policy
 Elements of Protection and Savings
Thank you