Assurance means the security for compensation. Under the contract of insurance, the compensation is paid by the insurer on the happening of an event. For example, in case of fire insurance, the compensation is given only when the insured suffers a loss due to fire. But in case of life insurance, the compensation is paid irrespective of happening of an event. In life insurance the compensation is paid either on the death or on expiry of a specific time period whichever comes earlier. Since payment of compensation is assured by the insurance company that is why life insurance is considered as a contract of assurance.