Life insurance or life assurance?

The terms life assurance and life insurance are often used to mean the same thing, but there’s actually a number of key differences.

In short, life assurance pays out when you die, whereas life insurance pays out if you die.

Both forms of cover have their pros and cons, but which is right for you?

By using an FCA regulated broker service you can compare both life assurance and life insurance quotes to help you make an informed decision on which is the most cost-effective solution that best meets your needs.

Keep reading this essential guide to find out if life assurance or life insurance is right for you…

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What is the difference between life assurance and life insurance?

While both provide protection for your loves ones if the worst were to happen, there are some crucial differences between life assurance and life insurance.

Life assurance Life insurance
Cover lasts for life Cover lasts for a set period of time (the term)
Over 50s plan or whole of life insurance options Level or decreasing terms options
Pays out when you pass away, (not if) Pays out if you pass away during the term
Guaranteed pay out Lower premiums


What type of cover is best for you depends on what it is that you want to protect and for how long.

What is life assurance?

Unlike life insurance, life assurance doesn’t expire, meaning that a pay out is guaranteed.

Both whole of life insurance and over 50s plans are forms of lifetime assurance cover.

As there’s no expiration date on the policy, premiums must be paid for the rest of your life or until a certain age as specified by the insurer.

Depending on your age when you take out the policy, you risk paying more into it than it’ll pay out to your loved ones. In addition, life assurance policies, like whole of life insurance, tend to carry more expensive premiums - as a pay out is guaranteed.

What is life insurance?

Life insurance is term-based, meaning you choose the level of cover you require and the length of time you wish to be covered (the term).

Typically, you’ll choose between level and decreasing terms.

With level term life insurance, your sum assured (pay out amount) remains fixed throughout the lifetime of your policy.

In contrast, with decreasing term life insurance, your sum assured will reduce over time.

Your monthly premium is then calculated accordingly, using information such as:

You’ll continue to make payments throughout the term and if you die before the end of the policy, your beneficiaries receive a pay out.

However, if you outlive the policy it’ll expire and no pay out will be made.

Thereafter you either need to take out a new policy or your loved ones could be left exposed.

Are there similarities?

Yes, both provide cover to protect your loved ones if the worst were to happen.

Whether you choose an assurance or insurance policy your cover will cease if you stop paying your premiums.

Either policy options can be written into trust. This could help avoid/minimise 40% inheritance tax, by detaching the proceeds of your policy from your estate.

Also, the cost of your premiums in either scenario will be heavily influenced by your sum assured. The greater the sum, the higher the premium.

Lastly, if you’re a smoker you’ll be required to disclose this information during either application process.

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Types of life assurance

There are 2 types of life assurance; whole of life insurance and an over 50s plan.

As previously mentioned, life assurance covers you for the rest of your life, regardless of what age you pass away.

As long as you were honest on the application and have paid your premiums, a pay out is guaranteed.

Both policy options involve determining the pay out sum you require.

Over 50 plans

  • Over 50 plans offer guaranteed acceptance if you're aged 50-85 and a UK resident
  • Includes a waiting period at the start of the policy for 12 or 24 months. You can't make a claim during this time
  • No medical information, other than whether you smoke, is required
  • Ideal for anyone slightly older and/or in poor health, who may otherwise be denied life insurance
  • Can be the more expensive, as the lack of medical information means the insurer needs to cover the unknown risk your health may pose
  • Sum assured limit £20,000

Whole of life insurance

  • Whole of life insurance, like an over 50s plan, lasts as long as you do
  • The premiums are calculated based on the level of cover you require, as well as the risk you present
  • You do have to answer health-related questions or undergo a medical
  • If you're younger and in good health, your monthly premiums will be lower
  • It's also possible to secure a much greater pay out amount vs an over 50s plan
  • Sum assured limit £1,000,000

Whilst monthly premiums may be lower, there’s the possibility that in the long run, a whole of life policy can end up costing more.

In some instances, over 50s plans only require you to make payments up until a certain age - usually 90.

Therefore, dependant on the age you were when you took the policy out and how long you live, a whole of life policy could result in you paying more.

Get in touch to compare multiple life assurance policies to find your best option.

Types of life insurance

Now that we have defined the key differences between life assurance and life insurance, let’s take a look at the various types of life insurance.

As discussed, there are two main types of life insurance; level term and decreasing term.

Level term life insurance provides a fixed lump sum pay out to your loved ones if you pass away during the term.

This means that no matter when you pass away during the term, your loved ones will always receive the same amount.

Unlike decreasing term, where the amount paid out to your loved ones reduces over time.

Level term

  • Level term life insurance involves determining a pay out amount and the length of time you wish to be covered
  • Premiums are calculated and paid for the length of the term
  • If you pass away during the term, your loved ones receive a full pay out (as specified by the policy)
  • This type of policy is ideal for covering an interest-only mortgage and/or meeting future living costs
  • Premiums more expensive than decreasing term, (as pay out sum fixed)
  • Pay out up to £1,000,000

Decreasing term

  • Decreasing term life insurance involves defining the level of cover you require and for how long
  • You pay monthly premiums and if you pass during the policy term, your loved ones receive a pay out
  • The main difference here is that the pay out sum decreases over time (the earlier into the policy you die, the larger the pay out)
  • This is ideal if you’re covering a repayment mortgage, as the pay out sum can decrease over time to mirror the mortgage balance
  • Because the risk to insurer reduces over time, decreasing term is cheaper than level term
  • Pay out up to £1,000,000

When choosing between level and decreasing term life insurance the important decision is whether or not your need the pay out sum to hold its value.

Contact us to compare life insurance policies from some of the UK's leading providers.

How much life cover do I need?

Working out how much cover you need to protect your loved ones can seem like a daunting task, but it doesn’t have to be.

To work out your cover amount you can ask yourself some simple questions, such as:

  • Could my partner afford to pay off the mortgage?
  • Could my family afford day-to-day living costs?
  • Could my loved ones pay for my funeral?
  • Would I be able to provide an inheritance for loved ones?

Once you know what needs protecting, you’ll have a good idea of the amount you need to be covered for.

Alternatively, you can use the calculator below to help you get an idea of the level of cover you need.

How much life assurance do you need?

Enter your financial commitments to understand the level of cover you require.

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£121,687 is the estimated average outstanding mortgage per household in the UK.

Our property is generally the largest financial commitment any of us will make.

Your life insurance should cover this significant debt should you no longer be around.
£
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According to Money Advice Service, full-time childcare in the UK now costs £242 a week.

The loss of a parent could result in the need for additional childcare whilst the surviving parent increases their hours to account for lost income.

Your life insurance cover should factor in this additional required outgoing.
£
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The average level of debt (minus a mortgage) in the UK is £15,385.

Factoring in any outstanding debts in your name when arranging life insurance ensures this burden is not passed to loved ones.
£
?

You may wish to leave your loved ones an inheritance or lump sum gift upon your passing.

Factoring in the gift amount when arranging your cover will ensure the pay out amount will be sufficient to provide your loved ones with this selfless gesture.
£
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According to SunLife, the average cost of a UK funeral is now £4,417, whilst the total cost of dying is £9,493.

This is a 130% increase over the past 16 years and shows no signs of slowing down.

A significant cost which should be factored into the amount of life insurance you secure.
£
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If you are one of the 65% of the UK who are lucky enough to have savings, this could be used as protection if you were to pass away.

Any pay outs from existing life insurance policies and investments can also be used as financial protection for your loved ones if you were no longer around.

Factor this into your required cover amount.
£ -

Your total cover estimate

£ 0

Let us find your best available quotes.

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Once you know how much cover you need, it should make the choice between life assurance or life insurance easier.

When life assurance doesn’t pay

Generally, a pay out is guaranteed with life assurance, but only if all necessary information is disclosed on the application.

If upon your passing, information is found to have been non-disclosed, the policy is invalid and a pay out will be denied.

This is also the case with life insurance, so regardless of the policy you choose it's essential you're truthful during the application.

Whole of life insurance may be cheaper on a monthly basis then an over 50s plan but can be more expensive in the long run.

Whilst monthly premiums may be lower, there's the possibility that in the long run, a whole of life policy can end up costing you more.

In some instances, over 50s plans only require you to make payments until a certain age, this is usually 90.

Therefore, depending on the age you were when you took out the policy and how long you live, a whole of life insurance policy could result in you paying more.

What should you choose: life assurance or life insurance?

The choice between life insurance or life assurance is one that’ll be personal to you.

There are many things to consider when deciding which option is right for you.

The key factors include:

  • Your age
  • What it is you want to cover (mortgage debt, living expenses, funeral costs, inheritance)
  • Your available budget
  • Whether you need a guaranteed pay out
  • Your health and wellbeing

If you’re looking for protection to cover your children, then life insurance may be the most suitable option as you can choose your term to run until they're financially independent.

However, if you’re looking for cover to leave as an inheritance or to cover your funeral, life assurance may be the best option as the cover will last for life.

At Reassured we have an award-winning team who can help you through the application and provide any information you need to help make an informed decision.

Compare life assurance quotes

To find the best life cover option that meets all of your needs, you can use an FCA regulated broker (like Reassured) to compare both life insurance and life assurance quotes.

Whatever you decide, comparing quotes is essential to find the right policy at the best price, as premium costs can vary.

We can also help explain any jargon you may not understand. Plus our award-winning service is completely FEE-FREE for you to use.

Get in touch and let us help you save valuable time and money.

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