Life assurance vs life insurance

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Life insurance and life assurance: the basics

Life insurance

Life insurance pays out a lump sum to your loved ones if you die within a set time (the policy term), for example 25 years. If you live longer than the term, the policy will end without a payout being made.  

People often take out life insurance policies to cover specific timescales, for example the length of their mortgage. 

Life assurance

Life assurance covers you for your entire life, and is often known as whole of life cover.

It guarantees a lump sum payout when you die, as long as you’ve kept up with your monthly premium. It’s commonly used for estate planning or covering funeral bills. 

Because there’s no fixed expiry date, premiums tend to be higher for this type of protection. 

What is the difference between life insurance and life assurance?

Here are the key differences between life insurance and life assurance, at a glance:

Feature

Life insurance

Life assurance

Cover duration

Covers you for a set period, typically between 10 and 30 years

Covers you for the whole of your life

Age limit

Term policies can usually only be bought up to the age of around 74-77

Can typically be bought up to the age of around 84-89

Medical screening

You’ll usually be asked questions about your health, including if you smoke and drink. Some policies also require a medical check

Over 50s cover is a type of whole of life policy that doesn’t involve medical questions, so acceptance can be guaranteed

Cash value

The lump sum payout stays the same or can be set to decrease in line with your mortgage balance. It has no cash value unless a valid claim is made

Some whole of life policies can be investment-linked, so the lump sum payout could potentially increase

Cost

Life insurance is typically a cheaper option, especially if you’re young and healthy

As the payout is guaranteed, premiums can be more expensive

Which is the right option for me?

If you’re weighing up life assurance vs life insurance, think about your situation and the people you want to protect financially.

How long do you want the cover to last?

How much can you afford?

Are you in poor health?

How much cover do you need?

How much does life insurance cost?

There are various factors that are considered when calculating the cost of a life insurance quote.

Customers who compared 10-year term life insurance policies with us were typically quoted less than the following:

Cover amount

Monthly premium

£100,000

£16.022

£175,000

£18.353

What else affects the cost?

The examples above are based on a 10-year policy. Your quote will also depend on factors such as:

  • Your age – life insurance generally becomes more expensive as you get older. Typical monthly premiums range from £234 for 16-24 year olds to £634 for people aged 45-54.

  • Your lifestyle – smokers usually pay more. Non-smokers typically pay £444 compared with £554 for smokers.

  • The length of your policy – longer terms usually cost more, as you’re covered for a longer period.

  • The amount of cover you choose – higher cover amounts generally mean pricier monthly premiums.

Each insurer assesses risk differently, so prices may vary.

What are the main types of life insurance?

Life insurance is split into two main policy types: 

  • Level-term life insurance – the fixed lump sum payout, premiums and amount of cover stay the same throughout the policy term. The typical premium for level-term life insurance is £514 per month.

  • Decreasing-term life insurance – the payout amount decreases over the policy term. For example, the payout after 15 years would be smaller than after five years. This type of policy is often used to cover a repayment mortgage. The typical premium for decreasing-term life insurance is £374 per month.

How much does life assurance cost?

Life assurance typically costs more than life insurance. You’re essentially paying more for the assurance of a guaranteed payout when you die. 

Factors that can affect the cost of your policy are the same as with term life insurance. These include your: 

  • Age – the younger you are, the cheaper your premiums are likely to be

  • Medical history – this includes both yours and your family’s

  • Lifestyle – how much alcohol you drink and whether you smoke can make a big difference to the cost of your policy

  • Sum insured – the payout of compensation you want your beneficiaries to receive.

Looking for a life insurance quote instead?

If you’re looking to compare life insurance quotes, we can help.  

Simply give us a few details, including: 

  • Your name and address 

  • Your address

  • Your date of birth

  • Whether you smoke

  • How much cover you want

  • How long you’d like the cover for

  • Other policyholder’s details if you’re taking out a joint policy

You’ll also be able to add any optional extras such as critical illness cover.

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Tim Knighton

What our expert says...

“Life insurance could offer a financial safety net if you were to die unexpectedly. It could help your dependants cover your debts and living expenses. Life assurance is more of an investment, offering a guaranteed inheritance for your family when you die – even if you live to a ripe old age.”

Tim Knighton, Life, health and income protection insurance expert

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Life insurance vs assurance

FAQs

Is life assurance worth it?

Life assurance could be worthwhile if you can afford to pay the premiums for the rest of your life.

It could be used to pay inheritance tax as well as giving you reassurance that your beneficiaries will receive a fixed lump sum when you die.  

But you’ll need to consider your own circumstances and financial goals first. 

What isn’t covered by life assurance?

Life assurance may not cover all causes of death – for example, it might not cover death caused by drugs, alcohol abuse or suicide.  

Make sure you check which causes of death are covered before you take out the policy.

Can I cash-in a life assurance policy early?

Some older policies may allow you to cash-in and receive a smaller sum before you die. However, there’s usually a hefty penalty to pay and you may end up receiving less than you’ve invested over the years.

These types of policies are no longer common and are not available on our comparison service.

How does a life assurance policy pay out?

A life assurance policy pays out when the policyholder dies. The named beneficiaries or trustees (if the policy is written in trust) should contact the insurance provider so the claim process can begin.

The assessor will need some information – usually the policy number and details from the death certificate. Once the claim is approved, the money will be sent as soon as possible.

Is a life assurance payout tax-free?

Your family won’t have to pay capital gains tax or income tax when they receive the payout from your life assurance policy.

But if the value of your estate is more than £325,000, it may be liable for inheritance tax. The threshold increases to £500,000 if you leave your home to your children or grandchildren and your estate is worth less than £2 million.

You may be able to protect the payout from inheritance tax by writing your whole of life policy in trust. This way, your life assurance payout will be kept separate from the rest of your estate. There’s no need to wait for probate either, so your beneficiaries would receive the money much sooner.

Looking for something else?

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Tim Knighton
Reviewed 27 Jul 2026 by Tim Knighton Life, health and income protection insurance expert

Tim Knighton is an expert in building and managing relationships with big brands for the benefit of customers, with more than 20 years of experience. He seeks out the right products that look after you and those you love most during the toughest times.

Methodology

1 Based on Trustpilot ratings (July 2026).

2 51% of our customers were quoted less than £16.02 per month for their life insurance for a 10-year term, up to £100k worth of cover and no critical illness cover in June 2026.

3 51% of our customers were quoted less than £18.35 per month for their life insurance for a 10-year term, up to £175k worth of cover and no critical illness cover in June 2026.

4 Based on 51% of customers who compared quotes for this type of policy in June 2026.