Assurance and Insurance

In this article we will discuss the meaning and differences between Assurance and Insurance and matters incidental thereto.

There are basically three Latin Words ‘Assure’, ‘Ensure’ and ‘Insure’. Latin root secures (se without, curus care), i.e., without care. The term ‘assure’ denotes to promise or say with confidence. For example: I assure you of my support. ‘Ensure’ on the other hand is to make sure something will happen, for example: please ensure that you read this newspaper regularly. ‘Insure’ is to issue an insurance policy. For example: My car is insured for Rs. 3 lacs.

This article was submitted by Anuj Arora from Center for legal studies.

The term ‘assure’ and ‘insure’ are related herewith as to insurance. The terms ‘Assurance’ and ‘Insurance’ are commonly used in insurance contracts. From historical point of view the word ‘Assurance’ is more older, which was used in all types of insurance contracts by the end of 16th century. But Lloyds also used the word ‘assurance for all classes of business. In U.S.A. the term “insurance” is favoured for use of all branches of insurance. In Australia also the use of the words insurance, insured and insurer instead of assurance, assured and assurer has become more common when referring to life contracts especially after the enactment of the Australian Life Insurance Act, 1945.

The Legislature in India has also preferred the word ‘insurance‘ for all insurances, general as well as miscellaneous, thus showing that intrinsically there is no difference in significance between the two words but the word insurance is gaining preference world wide. The significance of difference between ‘assurance’ and ‘insurance’ is of certainty.

It would be no exaggeration to say that industrial world without insurance is like a car without shock absorber. The inference of assurance denotes certainty. The collective bearing of risks is insurance said William Bevridge. On the other hand the word insurance is used against indemnity like fire insurance, marine insurance etc.

This is because that in life insurance there is assurance from the insurer to make payment of the assured sum either on death or the maturity. This is certain, that is why we find assured thus assurance. Whereas in these types of insurance, the insurer is liable to indemnity only in cases of loss to property or goods, otherwise not.

This indicates difference between ‘assurance’ and ‘insurance”. It is why life insurance contracts are called contract of assurance butfire, marine or other general insurance are called contract of insurance. The aim of all insurance is to protect the owner from a variety of risks which he anticipates. He who seeks protection is called the assured or insured and the other person who takes the risk by undertaking to protect that other from loss is called the underwriter or insurer and he does this for a small consideration called the premium. To carry on business of insurance an insurance company must be first incorporated under the Companies Act, 1956 and must also be registered with the Insurance Regulatory and Development Authority.

Section 3 of IRDA Act provides procedure of registration. On being satisfied the Authority will allow to carry on business with the name in insurance company or assurance company. This puts business of insurance and insurance on the same footing.

Basis of difference	‘Assurance	Life Insurance
Scope	This term is used only in life insurance therefore the scope is comparatively limited	This term is used for all other types of insurance and therefore, the scope is wider.
Renewal of policy	The life insurance contract is a continuing contract and it will not lapse unless the premium is regularly paid	Indemnity insurance is a contract from year to year and it automatically lapses after one year though it can be renewed.
Certainty of event	The event is bound to happen sooner or later.	It is not certain whether the event insured against would happen or not.
Amount of claim	The policy amount is paid to the assured in full on the maturity or on death along with bonus, etc. announced by the insurance company from time to time	The payment of claim is subjected to the element of actual loss but not more than the insured sum.
Principle of indemnity	Principle of indemnity does not apply in life assurance. The sum assured is payable irrespective of any profit or loss and the full extent of the amount insured.	Principle of indemnity is the basis of insurance contracts.
Relationship	The word ‘assurance’ indicates a relationship with the principle of insurance.	The word ‘insurance’ only represents the behaviour of insurance