Life Insurance Vs Assurance: What's The Real Difference?

Life insurance and life assurance are often used interchangeably, but there is a subtle yet key difference between the two. Life insurance covers the policyholder for a specific term, whereas life assurance covers the policyholder for their entire life. Life insurance is protection for the term of the insurance cover, meaning that if the policyholder dies during the term of the policy, the insurance company will pay a tax-free sum to their beneficiaries. However, if the policyholder outlives the term, their beneficiaries will not receive any payment. On the other hand, life assurance is not based on protection for a fixed term and instead means that the policyholder is covered until they die. Therefore, with life assurance, a payment is typically made when the policyholder dies.

Life insurance covers the policyholder for a specific term

Life insurance and life assurance are often used interchangeably, but there is a key difference between the two. While both are forms of protection designed to pay out after the policyholder's death, life insurance covers the policyholder for a specific term, whereas life assurance usually covers the policyholder for their entire life.

Life insurance is a form of protection for a specific term, often the same amount of time as your mortgage. You pay a premium for the term of your policy, and you are covered if you pass away during that term. The most common types of life insurance are level, increasing, and decreasing cover. Level cover provides the same amount of coverage for the entire policy term, while increasing cover increases over time to account for inflation, and decreasing cover decreases as you pay off your mortgage or other loans.

The length of the term you choose will depend on your specific needs and circumstances. For example, if you want peace of mind that your mortgage will be covered if you pass away, but don't feel you need life cover after your mortgage is paid off, a life insurance policy with a specific term may be more suitable.

Life insurance tends to be cheaper than life assurance because a payout is not guaranteed. If you outlive the term of the policy, your beneficiaries will not receive any payment. Therefore, it is important to choose a term that aligns with your needs and goals.

Life assurance covers the policyholder for their entire life

Life assurance, also known as 'whole of life' cover, is a type of insurance that covers the policyholder for their entire life. This means that a payout is guaranteed when the policyholder dies, as long as they have kept up with their monthly payments.

Life assurance policies have no fixed expiry date, unlike life insurance policies, which typically cover a specific term, such as 25 years. With life assurance, there is no risk of the policyholder dying after the end of the contract and not receiving a payout. This makes life assurance particularly appealing to those who want to ensure their loved ones receive a guaranteed inheritance, regardless of when they pass away.

The indefinite length of life assurance policies means that monthly premiums are usually higher than those of life insurance. Providers expect to make a payout at some point and this certainty results in higher costs for the policyholder. However, it is worth noting that some life assurance policies do allow policyholders to finish their payments at a certain age, often around 85.

Life assurance policies are often considered more of an investment than a standard insurance policy. They can be tailored to include an investment element, where the insurer invests the policyholder's monthly premiums. In this case, the eventual payout is affected by the performance of these investments.

Life assurance is commonly used in Inheritance Tax planning. By writing a whole-of-life policy in trust, individuals can help their family cover any forthcoming Inheritance Tax liabilities. This ensures that their loved ones receive the full benefit of the policy, without the value being reduced by tax.

Life insurance is cheaper because a payout is not guaranteed

Life insurance is often cheaper than life assurance because a payout is not guaranteed. Life insurance covers the policyholder for a specific term, which can be chosen by the policyholder when they apply. This term is usually the same amount of time as a mortgage, for example. If the policyholder outlives the term of the policy, their beneficiaries will not receive any payment.

Life assurance, on the other hand, covers the policyholder for their entire life. This is also known as 'whole of life' cover. Because death is a certainty, a payout is guaranteed, meaning that premiums for life assurance policies tend to be higher than for life insurance policies. Life assurance policies are considered more of an investment that offers a guaranteed inheritance for beneficiaries.

The monthly premiums for life assurance are usually higher as insurers know with a high degree of certainty that they will have to pay out at some point. However, certain life assurance policies do allow you to finish your payments at a certain age, often around 85.

Life insurance tends to be more affordable for those who only require cover for a specific period, such as the length of a mortgage. For those who want cover to remain in place for life and are happy to pay premiums until they die, life assurance could be a better option.

Life assurance is a form of investment

Life assurance policies are most commonly used in Inheritance Tax planning. A life assurance payout can be written in trust to help fund a family's Inheritance Tax liabilities. The word 'assurance' is used because you're assured that a valid claim will be paid regardless of when you die, as long as you pay your premiums.

The monthly premiums for life assurance are usually higher because there is a high degree of certainty that the insurer will have to pay out at some point. However, some life assurance policies do allow you to finish your payments at a certain age, often around 85.

Life assurance is a complex product that involves more of an investment structure. If you're considering taking out a life assurance policy, it's recommended that you speak to a financial advisor or directly to an insurer or friendly society.

Life assurance is also known as 'whole of life' cover

Life assurance, also known as whole-of-life cover, is a type of insurance that does not have a term limit. This means that it covers the policyholder for their entire life, and there is no end date attached to the policy. Life assurance is designed to pay out a tax-free lump sum to the policyholder's beneficiaries when they die, as long as they have kept up with their monthly payments.

The key difference between life insurance and life assurance is that life insurance covers the policyholder for a specific term, while life assurance covers the policyholder for their entire life. Life insurance pays out a tax-free sum to the beneficiaries if the policyholder dies during the term of the policy, whereas life assurance guarantees a payout regardless of when the policyholder dies.

Life assurance policies typically have higher premiums than life insurance policies because a payout is guaranteed at some point. The monthly premiums are usually higher for life assurance because insurers know with a high degree of certainty that they will have to pay out eventually.

Life assurance can be considered more of an investment than life insurance, as it offers a guaranteed inheritance for beneficiaries. Some life assurance policies allow policyholders to finish their payments at a certain age, often around 85. Additionally, life assurance policies may include an investment element, where the insurer invests the policyholder's monthly premiums, and the eventual payout is affected by the performance of these investments.

Life assurance is often used in inheritance tax planning, as the payout can be written in trust to help fund inheritance tax liabilities for the beneficiaries. By writing a whole-of-life policy in trust, the payout can be kept separate from the rest of the estate, avoiding probate and ensuring that beneficiaries receive the money sooner.

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