What is the difference between life assurance and life insurance?

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What is life assurance?

Life assurance, often known as a whole of life policy, is a type of insurance that continues indefinitely and pays out a lump sum once a policyholder dies (assuming they’ve met their monthly payments).

Premiums tend to be higher for this type of protection, because a provider expects to make a pay-out at some point.

What’s the difference between life assurance and life insurance?

Life assurance covers you for your whole life, and a standard life insurance policy usually covers you for a set term only. Certain life assurance policies do allow you to finish your payments at a certain age – this varies, but tends to be around 85.

The differences between life assurance and life insurance, in a nutshell:

Life insurance

  • usually covers you for a set term
  • can be tailored to cover specific costs like mortgage repayments or funeral costs
  • may be better suited to new parents who want the peace of mind that costs are covered for their dependents if the worst should happen
  • If you’re unsure our partners at LifeSearch can offer specialist advice on 0800 072 1147 (Monday to Friday: 8am-8pm. Saturday: 9am-2pm. Sunday 10am-3.30pm).

Life assurance

  • covers you for the rest of your life, no matter when you die
  • offers a guaranteed pay-out, so tends to be more expensive
  • is considered more of an investment that offers a guaranteed inheritance for your beneficiaries
  • If you’re unsure our partners at Assured Futures can offer specialist advice on 0808 141 1336 (Monday to Thursday 9am-8pm, Friday 9am – 5pm, Saturday 10am-2pm, Sunday Closed).

Life assurance vs life insurance

Once you’ve thought about a plan, it’s time to decide if a life assurance policy is for you. It’s worth being aware that over 50s life insurance can sometimes cover life assurance too.

The term ‘assurance’ means that you’re guaranteed to be paid out upon death and typically ‘whole of life’ insurance is the main assurance product.

To help you manage what is a complex subject, our life insurance calculator can help you work out how much life cover you might need at your age.

If you’re not sure which one is best for you, you should seek specialist advice.

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Frequently asked questions

Who needs life assurance?

You may prefer to take out a life assurance policy if the security of a guaranteed pay-out is important to you. While the premiums are usually higher, other insurance policies do not offer the 100% guarantee of a lump sum upon your death, which can make it an attractive deal.

What isn’t covered by life assurance?

Life assurance can offer the security of a guaranteed lump sum pay-out if you die. Just be aware though, that it might not cover death as a result of drug, 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 practice and are not available on our comparison service.

Which other life insurance options are available?

Your personal circumstances will dictate the best life insurance policy for you. Therefore you should think very carefully about your specific needs – be it covering bills, childcare costs, a mortgage, or protecting against a future event such as a critical illness or your own funeral expenses.

Of course, you may well have a different view on the best life insurance policy if you’re a new parent.

Should I choose life assurance or life insurance?

It depends what you’re looking for. Life insurance can provide security for those who lose someone earlier than expected. The pay-out can then cover a mortgage or other debts, to secure the futures of those left behind. Life assurance is a guaranteed pay-out upon death, but the premiums tend to be higher. Having that lump sum secured is attractive for some, but it depends if you will really need it, when the time comes. If you live long enough to cover those payments yourself, you may find you no longer need cover, but have been paying higher premiums with a life assurance policy for years. On the other hand, if you want to leave the people you love a guaranteed inheritance, life assurance may be worthwhile.

Unlike many other types of insurance, life cover is very much a personal and emotive choice that can have a major impact on both you and the people you love. Ultimately, you’ll want to make a decision that financially benefits the people you leave behind. It could help to talk to a financial expert who can take you through your options.

Is a life assurance pay-out tax-free?

Your family won’t have to pay capital gains tax or income tax when they receive the pay-out from your life assurance policy. But if the value of your estate is more than £325,000, your beneficiaries may have to pay inheritance tax.

You may be able to protect the pay-out from inheritance tax by writing your whole of life policy in trust. This way, your life assurance pay-out 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.

Where can I find a life assurance policy?

If you are over 50, whole of life cover can be compared through us, simply visit over 50s life assurance.

If you are under 50 or want more information on life assurance products, our partner, Assured Futures, will be more than happy to help. Give the friendly team a call on 0808 141 1336 (Monday to Thursday 9am-8pm, Friday 9am – 5pm, Saturday 10am-2pm, Sunday Closed).

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

With monthly premiums starting from as little as £3.58** for 10% of our customers, it could make sense to start your life insurance quote with us.

What’s more, it could take only four minutes^^ to do a comparison with our panel of providers. We’ll clearly lay out how much each policy might cost.

Start a quote and enjoy peace of mind for you and your family today.

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**10% of customers could achieve a premium of £3.58 per month for their life insurance for a 10 year term, up to £100k worth of cover and no critical illness cover. Based on Compare the Market data from March, 2022.

^^Correct as of March, 2022.

Author image Kara Gammell

What our expert says...

“It might seem morbid to think about life insurance, but ignoring it could leave your loved ones at risk. Life insurance can offer a financial safety net if you were to die unexpectedly, giving you peace of mind that your debts and living expenses will be paid off. 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.”

- Kara Gammell, Finances expert

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 pay-out when you die.

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

  • Age
  • Medical history, including 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 amount of compensation you want your beneficiaries to receive

What do I need to get a quote?

You can easily find a life insurance quote to suit your needs. Simply answer a few questions including:

  • your name
  • 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 like critical illness cover.

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