Assurance: Definition & Overview

KEY TAKEAWAYS

• Assurance is a type of insurance. It provides protection in the event of death, disability, or other unforeseen circumstance.
• There are many different types of assurance policies available. It is important to work with an experienced agent to find the right one for your needs.
• Some common features of these policies include contract management assurance and probity assurance.
• An auditor can provide assurance by conducting a financial statement examination. This provides assurance that the statements are free of material misstatement.
• An auditor can also provide assurance by issuing a report that states the financial statements are accurate. This type of report provides assurance to shareholders and other interested parties.

What is Assurance?

Assurance refers to the protection that an insurance policy provides. This can be in the event of death, disability, or other unforeseen circumstance. It is important to have this type of coverage in place so that loved ones are not left with large financial burdens in the event of an unexpected tragedy.

One of the biggest distinctions between assurance and insurance is time. Insurance protects over a limited time. But assurance can protect all your life—even until death.

Assurance can also refer to accuracy within a company. For example, an insurance provider can award you with an assurance letter. This letter indicates that your business can fulfill its obligations.

To learn more about assurance, continue reading the article below:

Working Process of Assurance

The working process of assurance is simple. You just have to pay monthly or annual premiums to the insurer. In return, the insurer will pay a lump sum benefit to your family in case of your death. The insurer will also provide other benefits like critical illness cover, terminal illness cover, and so on.

There are different types of assurance policies available in the market. You can choose the one that best suits your needs and budget.

Most people think that insurance and assurance are the same. But there are some key differences between the two. Insurance is a contract between you and the insurer. The insurer agrees to pay you a sum of money in case of an accident or illness.

An assurance mechanism, though, is a promise by the insurer to pay a lump sum benefit to your family in case of your death.

Your company might meet with an assurance agency for review. This is especially true if there are federal regulations that dictate assurance. When assurance of compliance is accepted, the agency head will sign off on your compliance with standards. 

It may also confirm that you meet financial goals. If they determine corrective action needs taken, you will have to comply with their requests.

Federalwide assurance exists in many domestic institutions. For example, federal departments must comply with assurance. These include:

• Department of Agriculture
• Department of Commerce
• Department of Transportation
• Department of Health and Human Services
• Department of Energy
• Consumer Product Safety Commission
• Central Intelligence Agency
• EPA (Environmental Protection Agency)
• Department of Education
• DOD (Department of Defense)
• Department of Justice
• Department of Veterans Affairs

If there are certain risks to subjects, adjustments will likely be needed to be made. An assurance coordinator will oversee your review. 

Types of Assurance

There are many different types of assurance policies available. So it is important to work with an experienced agent to find the right one for your needs. In some cases, you might need separate assurance coverage. Some common features of these policies include:

Contract Management Assurance

A type of assurance policy that provides protection in the event that a contract is not fulfilled. This can be due to the death or disability of one of the parties involved.

Probity Assurance

This type of assurance provides protection in the event that a business engaged in fraudulent or illegal activity.

Managing Risks Assurance

This type of assurance provides protection in the event that a business gets sued or faces other legal action due to its products or services.

Managing Projects Assurance

This type of assurance provides protection in the event that a project is not completed on time or within budget.

Asset Management Assurance

Asset management is the process of protecting and maximizing the value of physical or intangible assets. This includes identifying, tracking, and maintaining information on assets.

Governance Assurance

Governance assurance ensures an organization adheres to its governing documents. i.e., its bylaws or articles of incorporation. This can be important in the event of a legal dispute or other action.

Compliance Assurance

This type of assurance is the process of ensuring that an organization is complying with all applicable laws and regulations. This can be important in the event of an audit or other investigation.

Risk Management Assurance

Risk management is the process of identifying, assessing, and managing risks. This can be important in the event of an unforeseen circumstance or disaster.

Information Systems Assurance

This type of assurance ensures an organization’s information systems are secure and working properly. This can be important in the event of a cyber-attack or other data breach

Difference between Assurance and Negative Assurance

Negative assurance is a statement from an auditor that there is nothing to show that the financial statements are not correct. Assurance, on the other hand, is a statement from an auditor that the financial statements are correct.

It’s worth noting that negative assurance doesn’t necessarily mean wrongdoing isn’t taking place in a company. Rather, it just means that an auditor hasn’t found anything to indicate that the financial statements are not accurate.

Assurance Example

An example of assurance would be an auditor’s report that states the financial statements are accurate. This type of report provides assurance to shareholders and other interested parties. It states that the statements are reliable.

Negative assurance would be an auditor’s report that states that there is nothing to show the financial statements are not accurate. This report assures shareholders and other interested parties that the statements are reliable.

Your company will receive an assurance letter once the provider determines that you can meet your obligations. This can be important in the event of a contract dispute or other legal action.

Summary

Assurance provides protection in the event of death, disability, or other unforeseen circumstance. There are many different types of assurance policies available. Thus, it is important to work with an experienced agent to find the right one for your needs.

Some common features of these policies include managing risks and compliance assurance.