What is the Difference Between Life Assurance and Life Insurance?

Quick Links

Life Insurance: Protection for a Fixed Term

Life Assurance: Cover That Lasts a Lifetime

Cost Considerations

How Do Claims Work?

Finding the Right Cover

Many people assume life assurance and life insurance are the same, but they serve different purposes.

While both provide financial protection for your loved ones, the way they work and what they cover varies. Understanding these differences can help you decide which option suits your needs best.

Life Insurance: Protection for a Fixed Term

Life insurance provides financial security for a set period.

If the policyholder passes away during the agreed term, a lump sum is paid to the beneficiaries. If the term ends and no claim has been made, the policy simply expires.

This type of cover is often chosen by individuals looking to protect their family while they have financial commitments, such as a mortgage or dependent children.

Policies vary, with level term insurance offering a fixed payout throughout the term and decreasing term insurance reducing in value over time, often aligning with a repayment mortgage.

Life insurance is generally more affordable than life assurance, as there is no guaranteed payout. The cost is influenced by factors such as age, health, lifestyle, and the level of cover required.

Life Assurance: Cover That Lasts a Lifetime

Life assurance, often called whole-of-life cover, guarantees a payout whenever the policyholder passes away.

This makes it a popular choice for those looking to provide an inheritance or cover expenses such as funeral costs and inheritance tax.

As the payout is certain, premiums tend to be higher than those for life insurance.

Some policies include an investment element, where a portion of the premium is placed into a fund that may affect the final payout value.

Cost Considerations

Life insurance is often used for short-to-medium-term protection, while life assurance can be beneficial for estate planning and leaving a financial legacy.

Premiums for either type of policy will depend on factors such as:

• Age at the time of application
• General health and medical history
• Lifestyle choices, such as smoking or high-risk activities
• The amount of cover and length of the policy

Understanding how these factors affect premiums can help you find a policy that provides the right balance of affordability and security.

How Do Claims Work?

With both life insurance and life assurance, a claim is usually made by the policyholder’s beneficiaries. The insurer will require documentation, such as a death certificate, before processing the payout.

In most cases, funds are released promptly, helping families manage financial responsibilities during a difficult time.

Finding the Right Cover

Deciding between life assurance and life insurance depends on your circumstances and what you want to achieve.

If you need protection for a specific period, such as covering a mortgage, life insurance may be the most practical choice.

If you want lifelong security and a guaranteed payout, life assurance could be the better option. Choosing the right policy can feel overwhelming, but you don’t have to do it alone.

UK Moneyman’s team of experienced protection advisors can explain your options and help you secure the most suitable cover based on your needs.