Washington State Insurance Practice Exam

What distinguishes "assurance" from "insurance"?

1. Assurance covers uncertain events, while insurance covers certain events

2. Assurance deals with life coverage, while insurance is for property

3. Assurance is for certain events, like death, whereas insurance covers uncertain events

4. Assurance is more expensive than insurance

The correct answer is: Assurance is for certain events, like death, whereas insurance covers uncertain events

The distinction between "assurance" and "insurance" primarily lies in the nature of the events that each type of financial protection addresses. Assurance relates to scenarios where the event is certain to happen, such as death, especially in the context of life assurance policies. Therefore, when someone purchases life assurance, they are assured of a payout upon the occurrence of death, which is an eventual certainty for every individual. On the other hand, insurance is generally associated with uncertain events, such as accidents or natural disasters that may or may not happen. Insurance covers risks and provides financial protection against those unexpected occurrences, highlighting the element of uncertainty involved. This understanding is crucial as it underpins the fundamental principles of risk management in the insurance industry. The correct choice captures this essence by accurately stating that assurance is related to certain events, like death, while insurance pertains to uncertain events.