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.

Holly Bennett Published on 11 August 2022.
Life Assurance vs Life Insurance: What’s the Difference?

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.

» MORE: Whole of life cover pros and cons

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 assurance

Life insurance

Term length

Cover lasts until you die

Cover lasts for a specific period of time

Payout

Guaranteed whenever you die

If you outlive the policy term, there’s no payout and the policy ends

Age restrictions

No upper age limit for the payout, but a minimum and maximum age when you apply

Typically has a maximum age it could pay out, such as 75, and age restrictions when you apply 

Cover amount

Level cover (stays the same) or increasing cover (rises with inflation) is available

Level, increasing or decreasing cover (reduces as you pay off a debt you’re covering, usually a mortgage) is available

Features

Some types are investment-linked or let you withdraw cash

Not investment-linked and has no cash value. You pay premiums and the insurer pays out if you die during the cover term

Premiums

Payments can be fixed or reviewable, where they may go up

Typically fixed premiums, so costs are predictable, though some providers offer reviewable rates

Cost

Often more expensive than term cover, as the payout is certain

Usually 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.

» COMPARE: Life insurance quotes

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

About the author:

Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years. Read more

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