What is 'Assurance'

Assurance is a type of financial coverage that provides remuneration for an event that is certain to happen. Assurance is similar to insurance, with the two terms often used interchangeably, but insurance specifically protects policyholders from events that might happen and provides remuneration to them if and when those adverse events happen. Assurance may also refer to validation services provided by accountants and other professionals.

BREAKING DOWN 'Assurance'

One of the best examples of assurance is whole life insurance as opposed to term life insurance. (In the United Kingdom, "life assurance" is another term for life insurance.) The adverse event that the two types of life insurance deal with is the death of the person the policy covers. Since the death of he covered person is certain, a life assurance policy (whole life insurance) results in payment to the beneficiary when the policyholder dies. A term life insurance policy, however, covers a set period of time, such as 30 years, from the time the policy was bought. If the policyholder dies during that time, the beneficiary receives money, but if the policyholder dies after the 30 years, no money is received. The assurance policy covers an event that will happen no matter what, while the insurance policy covers an event that might happen (the policyholder might die within the next 30 years).

Assurance as Professional Services

Assurance can also refer to professional services provided by accountants, lawyers and other professionals that assure the integrity and usability of documents and information produced by businesses and other organizations. Assurance in this context helps businesses and other institutions manage risk and evaluate potential pitfalls. Audits are one example of assurance provided by such firms for businesses to assure that information provided to shareholders is accurate and impartial.

Example of Assurance Services

Investors of a publicly traded company grow suspicious that the company is recognizing revenue too early, leading to positive financial results in recent quarters that will also lead to worse results in the future. Under pressure from shareholders, the management of the company in question agrees to hire an assurance firm to review its accounting procedures and systems and provide a report to shareholders. The report will provide assurance to shareholders and other investors that the company's financial statements are accurate and that its revenue recognition policies are in line with generally accepted accounting principles (GAAP). The assurance firm reviews the financial statements, interviews accounting and other department personnel, and speaks with customers and clients. The assurance firm finds that the company in question has followed GAAP and assures stakeholders that the company's results are sound.

RELATED TERMS
  1. Negative Assurance

    A representation that particular facts are believed to be accurate ...
  2. Assurance Services

    A type of professional service usually provided by CPAs. Assurance ...
  3. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  4. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  5. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  6. Rider

    A provision of an insurance policy that is purchased separately ...
Related Articles
  1. Retirement

    Understanding Different Types of Life Insurance

    Understand the various types of life insurance, how each can be used in personal or business financial planning, and for whom they are best-suited.
  2. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  3. Insurance

    Dividend-Paying Whole Life Insurance: What to Know

    Many whole life insurance policies pay dividends. Here are what policyholders need to consider.
  4. Insurance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  5. Insurance

    Getting Your (Insurance) House in Order

    From starting a family to retirement, insurance can play a role in taking care of financial needs. This piece looks at some of the choices you can make.
  6. Insurance

    How Life Insurance Payouts Work

    Life insurance provides peace of mind to policyholders and their loved ones.
  7. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  8. Insurance

    Term Life Insurance: Everything You Need to Know

    Term life insurance is an affordable way to financially protect your loved ones after your death. Here's what you need to know before purchasing a policy.
  9. Personal Finance

    The Best Life Insurance for Military Families

    Two of the most common types of life insurance are term and whole life. Here's why the latter isn't a good idea for most military families.
  10. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
RELATED FAQS
  1. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  2. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  3. How can I invest in a mutually owned insurance company?

    Read about the difference between mutual and stock insurance companies, including how to become a de facto investor of a ... Read Answer >>
  4. Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ... Read Answer >>
Hot Definitions
  1. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
  2. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  3. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  6. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
Trading Center