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Published 11 August 2022
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Life Assurance vs Life Insurance: What’s the Difference?

Life assurance is cover that lasts your whole lifetime, while life insurance usually lasts for a specific period of time. Here’s why that difference matters if you’re thinking of putting that protection in place.

Life insurance jargon can be off-putting, and when different types of cover sound pretty similar it probably doesn’t help.

In a 2022 NerdWallet survey, 4% of people we asked wouldn’t consider getting life insurance because they thought it was too complicated, with 20% only shopping for it after seeking financial advice.

When it comes to life insurance and life assurance, the main difference is simply how long the cover lasts. This is important, as it’s about whether the insurer will pay out whenever you die, or only if you pass away during a specific window of time. There are a few other key distinctions too, which we explain here.

What is life assurance?

Life assurance, also called whole of life insurance, is a type of life cover that lasts until you die, and pays out whenever that happens, provided you have paid your premiums.

This means you don’t have to choose a period of time to be covered because you’ve got it for life and the payout is guaranteed.

How does life assurance work?

With a life assurance policy, you agree to pay regular premiums, usually monthly or sometimes annually. Unlike term cover, life assurance doesn’t expire after a specific period of time, it lasts until you pass away.

Depending on the type of whole of life policy, your premiums and cover amount may be fixed, where you pay the same amount for life, or reviewable, which means they could increase.

Investment-linked policies are reviewable. This means premiums can change in line with how the investments perform, and your cover amount can too.

After your death, the insurer will pay out a tax-free lump sum to your beneficiaries.

What is life insurance?

Life insurance is a type of cover that pays out when you die, and sometimes after a terminal illness diagnosis, if it’s included in the policy. The idea is that the lump sum your beneficiaries might receive would help them to cope financially when you and your income are no longer around.

Standard life insurance, sometimes called term life insurance, is cover that lasts for a specific length of time, usually between 10 and 25 years. You can choose the policy term, so this might be until your mortgage is paid off, or until your children are likely to be financially independent. It’s as long as you think your financial commitments will last, when the lump sum might be needed.

With this type of cover, the payout only happens if you die while you’re covered. So if you outlive your policy term, there will be no payout and you won’t get your premiums back.

» MORE: Can you have two life insurance policies?

What are the differences between life assurance and life insurance?

When you pitch life assurance vs life insurance, the main differences are:

Life assuranceLife insurance
Term lengthCover lasts until you dieCover lasts for a specific period of time
PayoutGuaranteed whenever you dieIf you outlive the policy term, there’s no payout and the policy ends
Age restrictionsNo upper age limit for the payout, but a minimum and maximum age when you applyTypically has a maximum age it could pay out, such as 75, and age restrictions when you apply 
Cover amountLevel cover (stays the same) or increasing cover (rises with inflation) is availableLevel, increasing or decreasing cover (reduces as you pay off a debt you’re covering, usually a mortgage) is available
FeaturesSome types are investment-linked or let you withdraw cashNot investment-linked and has no cash value. You pay premiums and the insurer pays out if you die during the cover term
PremiumsPayments can be fixed or reviewable, where they may go upTypically fixed premiums, so costs are predictable, though some providers offer reviewable rates
CostOften more expensive than term cover, as the payout is certainUsually costs less than life assurance

» MORE: How different life insurance types work

How can I tell which type of insurance is best for me?

There are a few different types of cover, and which one is right for you depends on your circumstances and your finances. You could ask yourself:

  • How long do I want the cover to last? This might be how long you have financial responsibilities, such as while children are young or you’re paying off a mortgage.
  • What (and who) do I want any payout to cover? That might be a repayment mortgage or to cover general costs so your partner and children can maintain their standard of living. Or you may want to help cover a possible inheritance tax bill or funeral costs, or just provide a cash gift to your family.
  • What premium can I afford? You will need to keep paying your monthly or annual premiums for the cover to stay in place, so it must be affordable. Some types of life insurance are cheaper than others, though make sure you’re getting the amount of cover you need.
  • Do I need to get life insurance? If nobody depends on you financially, or wouldn’t be disadvantaged from losing your income, and you don’t have any debts to protect, you may not feel you need life insurance. You could consider other types of protection, such as critical illness cover or income protection, though.

A financial adviser can help you decide the type of cover you need, if you’re not sure. We don’t offer whole of life cover through our online quote service. If you’d like to get a quote for whole of life cover, just fill in this quick form and a LifeSearch adviser will be in touch.

Alternatively, you can get a quote for term life insurance using the link below.

WARNING: Some types of life assurance are investment linked. We cannot tell you if any form of investing is right for you. Depending on your choice of investment your capital can be at risk and you may get back less than originally paid in.

Image source: Getty Images

Dive even deeper

Feel the Fear and Consider Life Insurance Anyway?

Feel the Fear and Consider Life Insurance Anyway?

Life insurance can stir up difficult feelings that may even be a barrier to getting cover. Understanding why this decision can be emotionally charged might help you to approach it differently.

Can You Get Life Insurance with No Medical?

Can You Get Life Insurance with No Medical?

Most people don’t need to have a medical exam to get life insurance. But if the insurer does ask you to have one, it doesn’t necessarily mean you won’t be offered cover.

Does Life Insurance Cover Funeral Costs?

Does Life Insurance Cover Funeral Costs?

Taking out life insurance to cover funeral costs could help make life a little easier for loved ones at a difficult time. By making sure your beneficiaries receive a life insurance payout when you die, they shouldn’t have to pay for your funeral themselves.

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