What’s the difference between life assurance and life insurance?

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

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). Your monthly premium is then calculated accordingly.

You 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 the policy comes to an end and you’re still living, your life insurance expires and no pay out is issued. Thereafter you either need to take out a new policy or your loved ones could be left exposed.

What is life assurance?

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

Because there is no expiration date on the policy, premiums must be paid for the rest of your life, meaning that whilst a pay out is guaranteed, you risk paying in more than your loved ones will receive.

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

As a result, assurance policies, like whole of life insurance, tend to carry more expensive premiums, as a pay out is assured.

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life assurance vs life insurance

Are there similarities?

Yes. Regardless of whether you choose an assurance or insurance policy, your cover will cease if you stop paying your premiums.

Also, the cost of your premiums in either scenario will be heavily influenced by the determined pay out amount (or 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.

Types of life insurance

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

There are 2 main types of life insurance; level term and decreasing term.

When choosing between level term and decreasing term life insurance, the important decision is whether or not you need the pay out sum to hold it’s value.

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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 die. 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.

For the more mature, read our blog posts on over 60 or over 70 life insurance »

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 death, 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 always essential you’re truthful during the application.

Whole of life insurance may be cheaper on a monthly basis 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, dependant 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.

So what should you choose: life assurance or life insurance?

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

The key factors include:

Use an FCA registered broker to save yourself time and money

Whatever you decide, in order to secure the most suitable policy, it’s important to compare quotes, as premium costs can vary.

Using an FCA registered life insurance broker, like Reassured, can ensure you get the right cover, at the best price.

We can also help guide you and explain any jargon you may not understand. Plus, our award-winning service is completely FREE to use!

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