Life Insurance vs Life Assurance
The difference between life assurance and life insurance
The difference between life assurance and life insurance
When you start looking for life insurance you might see the phrase “life assurance” and assume it is the same thing. In fact, it is common for people to confuse these two, very similar terms when they look for a quote to protect their loved ones.
However, by looking at this issue in detail we can see that there are some crucial differences between the two types of policy that you need to be aware of. So, what are the main points when thinking about life assurance vs life insurance?
Life insurance and life assurance can seem like similar products, with the terms often used interchangeably. While both provide a financial safety net in the event of your death, there are some important differences between them.
What Is Life Insurance?
When you decide to take out a life insurance policy you are getting a type of cover that will pay out if you were to die while it is in force. This is typically known as term life cover as it runs for a fixed period and doesn’t pay out if you live until it finishes.
This is the most common type of life cover that people look for to cover debts such as a mortgage . It can also be used as a way of replacing your income in order to lessen the financial impact of your family losing you.
What Is Life Assurance?
While getting a life assurance quote sounds very similar to doing the same thing with life insurance in the UK , it is something that is set up differently and that you are likely to choose for different reasons. Overall, this is best viewed as being a mixture of protection for your family and of an investment.
This is because a life assurance policy will pay out on death but will also pay out if you decide to cash it in before then. With this kind of policy, you can choose to either get protected for a set period of time or else get a whole of life policy that runs until you pass away.
Life assurance is a longer-term form of life insurance that gives financial protection for your whole life rather than for a particular period of time. Life assurance policies typically last until you reach a set age, such as 95 or 100. Usually these policies have a cash value, meaning you can use the money to invest or save.
Life assurance is a form of insurance provided by an insurance company or insurance provider that pays out on the death of the insured person. A common example of this is term assurance whereby the plan pays out a sum of money upon death, provided the policyholder has died within the term of the cover. It is often used as a form of inheritance tax planning.
In contrast, life insurance is an income protection insurance policy that provides a monthly payment in return for a monthly premium. It is generally meant to provide protection for dependents. These policies can either be whole-of-life policies, covering a person until the day they die, or they can be term policies, similar to life assurance policies.
The type of cover you need will depend on your personal circumstances. Life assurance policies are generally beneficial for tax planning, income protection and providing a financial legacy, since the sum of money is paid out upon death; however, life insurance policies can provide ongoing financial security to your family should you die during the term of the policy.
Which One Should You Choose?
There is a difference between life assurance and life insurance, the choice between these types of life policy is really down to your own situation and what you want for the future. Having said that, the first thing you are likely to notice is that a life insurance quote is less expensive than its life assurance equivalent.
When considering life insurance vs life assurance, there are a few things to keep in mind. Life insurance is suitable for short-term cover, such as ensuring your children can receive an education if you pass away during the period of the policy. Life assurance, on the other hand, can provide financial protection for your whole life, with cash value that can be kept if you don’t claim.
If you can afford to pay the extra amount and like the idea of adding diversity to your investments with life protection then choosing life assurance could make sense. However, if you are looking to get an affordable life quote that gives you the basic cover that you need then this is a sound choice.
By getting a few different quotes to compare you should be able to fairly easily work out which kind of life cover is ideal for you just now. Of course, you can always take out a different policy in the future if your circumstances change.
This depends. Unless you’ve specifically requested it as part of your policy, then the funds won’t be initially available to your loved ones. This is due to payouts being delayed by questions around the cause of death, and other times insurance providers are too slow to send payments before a funeral is organised.
What is Term Life Insurance?
Term life insurance is a type of insurance policy which provides financial protection against death or disablement for a designated time period. It pays out a lump sum in the event of a death during the term of the policy with no return of premium, or surrender value. Term life insurance is cheaper than permanent life insurance, which offers protection for an entire lifetime.
What is Level Term Life Insurance?
Level term life insurance is a type of term life insurance policy which is written with a level premium structure. This means that the policyholder pays the same amount of premium for each year of the policy. The amount of cover remains the same, providing protection for your family or significant other in the event of your death.
Under level term insurance, the amount of money paid out to beneficiaries in the case of a claim remains the same throughout the term of the policy. This means that the death benefit is not affected by age or health.
Term insurance is a type of life insurance policy with no cash value and no surrender value. The policy is in effect only until the policy term expires. In the event of a claim the beneficiary will receive the death benefit and the policy will terminate with no other benefit to the policy holder.
Term life insurance is a great option for those who need basic life insurance coverage, and for those who want coverage at a lower cost. It offers peace of mind knowing that your family is taken care of in the event of your passing.
What is Income Protection?
Income protection is a type of insurance that provides an income stream if you are off work due to illness or injury for an agreed period of time. It pays out a percentage of your income when you’re unable to work, covering your bills and expenses until you’re able to return to work.
What is Critical Illness Cover?
Critical illness cover is a type of life insurance that pays out a lump sum if you are diagnosed with a specific life-threatening medical condition, such as cancer or a heart attack. The condition must be specified in the policy in order for you to make a claim. This type of insurance can provide financial security and help cover medical expenses if you become ill.
What is Decreasing Term Life Insurance?
Decreasing term life insurance is a type of life insurance policy that has a decreasing amount of cover over time. The benefit is usually only paid out as a lump sum in the event of the death of the insured, and the cover typically decreases on a monthly, annual or other periodic basis. This type of policy is usually taken out to pay off a mortgage or to provide protection for a loved one.
What is Mortgage Protection Insurance?
Mortgage protection is a type of decreasing term life insurance which is taken out in order to provide a death benefit to help pay off the outstanding debt burden should the death of the insured person occur while the debt is still outstanding. This type of policy can provide peace of mind to the borrower as it guarantees that the mortgage payments will be taken care of, regardless of the circumstances.
What is Level Cover Insurance?
Level cover is a type of life insurance that offers the same amount of cover throughout the duration of the policy, regardless of when the insured dies. This type of policy can be particularly useful when trying to provide protection for a loved one who may have an unpredictable income stream or who may be subject to potential health risks.
What is Entire Life Insurance?
Entire life insurance is a type of life insurance which provides the insured with life insurance cover for their entire life. This type of policy is typically more expensive but offers a more substantial life insurance benefit for a longer period of time. Some entire life policies also offer additional benefits such as cash value or the ability to take out a loan against the policy.
Life Insurance Cover and Life Assurance Benefit
Life insurance cover is designed to protect your family by providing them with financial security in the event of your sudden death. It ensures your beneficiaries receive money to pay for living expenses, bills and other debts, or a lump sum to support them financially.
Life assurance benefit is different from life insurance cover as the latter pays out a predetermined death benefit, while the former provides a lump sum of money to the insured’s family upon their death. The amount depends on the type of policy taken out, but the main goal is to offer your family financial support and security to cover important expenses such as repayment of mortgage, childcare costs, debt repayments, funeral expenses, and so on.
Both life insurance cover and life assurance benefit give financial protection, but they do so in different ways. If you are considering taking out a policy, make sure you understand the different types of cover available and select a policy that meets your individual needs, goals, and budget.
Buying Life Assurance Safely
The Financial Conduct Authority regulates both life insurance and life assurance products. Before taking out a policy, it’s important to compare the different kinds of life insurance and find the one that most closely matches your personal circumstances and budget.
Choosing the right life insurance or life assurance policy is an important decision, so it’s a good idea to get advice from an independent financial adviser to discuss your individual circumstances and the options available. Finding the right cover can help you be secure in the knowledge that your loved ones have the resources they need in case the worst happens.
Life Assurance vs Life Insurance – which is right for you? Understanding the differences between life assurance and life insurance as well as the terms associated with them, is key to choosing the right product for your own needs.
It is important to research life insurance and life assurance providers and policies to find the best option for you. Make sure to compare quotes from different providers to find the most competitive rates.
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