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 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, usually between five 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 or decreasing term insurance. With a level term policy, the lump sum your dependants would receive remains the same throughout the course of the term. With a decreasing policy, the amount they 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. 

What is life assurance?

A life assurance policy 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 right 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 and your financial circumstances. Life insurance is designed to be there when you need it most, while life assurance can be seen as more of an investment. 

Whichever option is right for you, make sure you understand the policy and always read the small print. Our trained team is 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.