Insurance or Assurance – is there any difference?

Everyone chops and changes both words so much that any difference seems to have merged.

Everyone chops and changes both words so much that in conversation and written use, any difference seems to have merged.

Financial advisers, writers and just about everyone else talk about life insurance, but you have to go back to the word roots to understand that insurance and assurance are not the same.

For a start, when speaking about assurance, the term is generally applied to a financial product connected to a person’s life.

Life assurance means that someone has a policy that is guaranteed to pay out at some time in the future when the policyholder dies.

The root word of assurance is ‘assure’, and when something is assured to happen, the implication is a promise or guarantee that someone will carry out an action at some time in the future.

Insurance is subtly different.

Yes, you can have life insurance, but mostly you have home insurance, car insurance, payment protection insurance or one of many other forms of insurance.

If you are insured, the policy provider will only pay out if you claim during the time that the policy is in force.

Insurance is a time-limited and event triggered protection – if something happens between this date and that date, then the policy will pay out. If it doesn’t, you lose the money you have paid for cover.

When you insure against an incident happening, the promise is conditional that the incident happens within a particular time limit.

To recap, life assurance and life insurance are subtly different.

• Life assurance generally applies to a whole-of-life policy. This sort of policy is assured to pay out on your death at some indeterminate time in the future. The policy has no time limit.
• Life insurance is often called ‘term life’ and only pays out if agreed events happen during the period the policy is in force. Examples of insurable events are critical illness or death.
• General insurance is a time limited policy that only pays out if the policy is triggered while in force. Events that set off a pay out include a car accident, a burglary at your home or payment of bills if you lose your job. Whether you can claim depends on the sort of insurance cover you may have.

Take care if you are considering a policy for your life and researching on the internet. British English sites should follow the assurance/insurance rules outlined in this article, but for US English financial services sites, any type of life cover is life insurance.

In the UK, a ‘life office’ sells life assurance and insurance policies and a ‘general office’ sells protection policies for your home, car and business needs.

Generally, a financial advisor deals with ‘life office’ business and an insurance broker handles ‘general office’ protection.

The line between the two is becoming a little more blurred as more and more financial advisors are selling general insurance as well. The Financial Services Authority regulates both life offices and general offices.

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