Assurance vs Insurance

Both insurance and assurance are financial products that are offered by insurance companies. In Afrikaans there is only one word for both of them, namely ‘versekering’. The difference between the two terms has become blurry with time and the two are often used interchangeably. However, they mean different things.

The term ‘Insurance’ refers to protection against an event that might happen, such as a motor accident, a fire or a burglary. This then means that an insurance policy is taken out to prevent a risk or provide cover against a risk, should such an event take place. A risk may be losing one’s house due to a fire. Nobody knows whether a fire will ever occur. But if it does, the insurance company will pay out the sum insured to the insured. If a fire doesn’t occur, the sum insured will never be paid out. It is often referred to as short-term and or general insurance.

The term ‘Assurance’ refers to protection against an event that will definitely happen, such as the end of an individual’s life. In assurance the question is not whether the event (death) will occur, but when the event will occur. The life assured keeps paying the premiums, and when he/she dies, the sum insured will be paid to his/her dependents or the nominated beneficiaries.

In case of an assurance policy, the company pays the amount to the dependants of the person if all the premiums have been paid on time and the person dies within the duration of the policy. In most of the cases, the person does not die within the term of the policy, hence it is called life assurance.

In years gone by this difference between the two terms was very strictly adhered to, but this is no longer the case. It is permissible to speak of ‘insurance’ in all cases. But if the word ‘assurance’ is used, we solely refer to life assurance.

There are many different types of assurance. We will discuss these in following posts:

• Whole Life Assurance
• Whole Life Limited Premium Assurance
• Endowment Assurance
• Limited Premium Endowment Assurance
• Pure Endowment Assurance
• Double Endowment Assurance
• Deferred Whole Life Assurance
• Term Assurance
• Convertible Term Assurance
• Assurance with Reduced Premiums During First Years
• Decreasing Term Assurance
• Reinforced Assurance