What is Assurance?

Assurance is the financial coverage that offers remuneration for a specific event that has to happen. Quite similar to insurance, sometimes, these two terms are used interchangeably. However, in reality, they both are not similar.

While insurance provides coverage for a restricted time, assurance is a persistent coverage that can be availed either till an extended period; or until death. Another way to define assurance is by terming it as professional services offered by lawyers, accountants, doctors and other similar professionals.

They assure the usability and integrity of information as well as documents produced by businesses and other entities.

Difference Between Assurance & Insurance

One of the assurance examples is the Whole Life Insurance, which is the opposite of term Life Insurance. In a way, the most hostile event that both term and life insurance deal with is the death of the insured.

Considering death is a certainty, whole life insurance offers payment to the beneficiary upon the death of the policyholder. On the other hand, term life insurance covers only a fixed period, say 10 years or 20 years from the date of the policy purchase.

If only the policyholder dies within the tenure, the beneficiary gets the money. However, if the policyholder doesn’t die within the tenure, there will be no benefit whatsoever. Thus, the assurance policy is meant to cover such an event that will happen, while the insurance policy covers such an incident that may happen.

Basic Example of Assurance

In terms of an example of assurance services, let’s take a scenario here. Suppose an investor of a public-trading company gets a doubt regarding the early recognition of the revenue. This may lead to positive results in the forthcoming quarters; however, it may also go the other way and worsen the results in the future.

Under pressure from shareholders, the management of the company agrees to get an assurance firm on-board to review the procedures and systems of Accounting to offer a detailed report to shareholders.

With this summary, both the investors and the shareholders get reassured that the financial statement is precise, and the revenue recognition policies adhere to the basic principles. Now, the hired assurance firm reviews the company’s financial statements, interviews the personnel working in the accounting department and speaks to the clients and customers. This ensures that the company is following all of the guidelines and is going on the correct path.