Family life insurance can secure the financial future of…
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…
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.
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.
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.
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.
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
Whole of life insurance
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.
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.
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.
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:
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.
Once you know how much cover you need, it should make the choice between life assurance or life insurance easier.
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.
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:
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.
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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