Life insurance vs life assurance

It’s a question we get asked frequently - what’s the difference between life insurance and life assurance? Despite sounding almost exactly the same and both being types of life cover, there is a subtle difference between the two, so read on!

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

Where life insurance will cover a specific term set out at the beginning of your policy, life assurance will provide cover for your entire life.

What is life insurance?

Life insurance provides a financial safety net for your dependants in the event of your death, in the form of a tax-free cash lump sum. Your beneficiaries can use the money however they wish, such as to pay off the mortgage or meet household expenses that your income might otherwise have covered.

A popular type of life cover is term life insurance, also known as fixed term insurance. This kind of policy stands for a defined period or a set term, often between 5 and 30 years, and is considered invaluable by, for example, homeowners who wish to protect their mortgage payments or by parents wanting to ensure their children could afford to go to university should anything happen to them.

Term life cover is available as level term insurance, decreasing term insurance or increasing life insurance

Level term life insurance

With a level term policy, the lump sum your beneficiaries would receive remains the same throughout the course of the term.

Decreasing term life insurance

With a decreasing policy, the amount you would receive reduces over the course of the term. Often, policyholders choose this option to reflect the decreasing balance of their mortgage, and the premiums can often be cheaper.

Increasing term life insurance

With this type of cover, your policy amount increases in line with inflation, as do your premiums to reflect the higher amount you’re covered for. This kind of policy is used more for long-term cover periods, where the value of your money could significantly change during that time.

If you’d like more information on this different kinds of term life insurances, we have a guide that breaks down each type:

Learn more

What is life assurance?

A life assurance policy also provides a financial safety net for your dependants in the event of your death, in the form of a tax-free cash lump sum. However, life assurance runs indefinitely, for as long as you live, and is therefore commonly known as whole of life cover. The word ‘assurance’ is used because you’re assured of a payout being made, as your death is certain at some point.

This type of policy is often viewed as an investment and can be a good way to ensure your funeral expenses are met or you can bequeath money to children and grandchildren. The premiums can, however, be pricier as a result, so it’s always a good idea to compare life insurance and life assurance to find the best policy for you.

Maximum cover life assurance is a type of policy under which premiums get reviewed as you get older and can be adjusted in line with your needs. It’s important to note with maximum cover, however, that the premium hike can be quite high.

Some life assurance policies have a cut-off point at which you will no longer have to pay the premiums - very often when you reach 85 or 90. Don’t worry, though, as the payout remains assured.

Do I need life insurance or life assurance?

This depends entirely on your lifestyle, your financial circumstances and why you’d like life insurance. Life insurance is designed to be there when you need it most, while life assurance will pay out upon your death.  

Whichever option is right for you, make sure you understand the policy and always read the small print. Our experienced advisors are on hand if you find it easier to chat about the options on the phone rather than comparing life cover quotes online, so call us on 0800 862 0373 and we’ll go through the details with you.

Who is life assurance for?

These policies are most commonly used in inheritance tax planning, or to leave a legacy to your beneficiaries. If you're considering whole-of-life cover, it's advisable to consult a financial adviser to determine if this type of protection suits your needs.

Life Insurance vs. life assurance FAQs

How much do life insurance and life assurance cost?

Life assurance generally costs more than life insurance, as you’re paying extra for the certainty of a guaranteed payout upon your death.

The factors influencing the cost of your policy are similar to those affecting standard life insurance, including:

• Age: Younger individuals typically enjoy lower premiums.
• Medical history: This encompasses both your personal medical history and that of your family.
• Lifestyle: Your alcohol consumption and smoking habits can significantly impact the cost of your policy.
• Sum insured: The amount you want your beneficiaries to receive.

Can I change the beneficiaries on my life assurance policy?

You must have at least one named beneficiary on your life assurance policies, generally all it takes to change a beneficiary is notifying your insurance company, though some may want written confirmation. You should also be aware that should you want your children to be beneficiaries, if they are all under the age of 18 when you take out your policy, you will have to name a guardian should they need to claim from your policy before they reach adulthood.