What is life insurance?
Life insurance is designed to pay out a tax-free lump sum if you die during the term of the policy. Cover can either be arranged on a ‘level’ basis, whereby any payout on death remains at the same level throughout the policy period. Alternatively, it can be arranged on a ‘decreasing’ basis, where the level of cover provided reduces as time goes by.
What is life assurance?
Whole life insurance has a fixed term, life assurance typically covers you for your entire life and so is often known as ‘whole of life cover. This premium for this type of cover tends to be more expensive than life insurance as a guaranteed payment. It is also more likely that premiums will be reviewed every few years, which means they can increase throughout the life policy.
Life insurance vs life assurance: benefits
Life assurance and life insurance both can provide valuable peace of mind that your loved ones will receive a lump sum in the event of your death. This can be used either to pay off the mortgage or to cover other essential outgoings – or both.
The main difference between life insurance and life assurance is that life insurance covers you for a set term, whereas life assurance covers you for your whole life.
The benefit of life insurance is that premiums will typically be lower than for life assurance, and you can pick how long you want to be covered for and whether you want the cover to remain the same or decrease over time.
With life assurance, however, the main benefit is that you will have cover for your entire life, although if you choose an investment-linked product, the amount your dependants will receive in the event of a claim isn’t guaranteed.