Assurance in the face of sin

How do we know whether or not we are saved? Specifically, does our continuing battle with sin negate the grace that God has begun in us? Here is what Thomas Watson, a Puritan says: "The Lord is pleased to let the in-being of sin continue, to humble his people, and make them prize Christ more. Because you find corruptions stirring, do not therefore presently unsaint yourselves, and deny the kingdom of grace to be come into your souls. That you feel sin is an evidence of spiritual life; that you mourn for it is a fruit of love to God; that you have a combat with sin, argues antipathy against it. Those sins which you once wore as a crown on your head, are now as fetters on the leg. Is not all this from the Spirit of grace in you? Sin is in you, as poison in the body, which you are sick of, and use all Scripture antidotes to expel. Should we condemn all those who have indwelling sin, nay, who have had sin sometimes prevailing, we should blot some of the best saints out of the Bible."