Life insurance vs assurance

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Life insurance vs life assurance

You might have seen the phrases life insurance and life assurance and wondered what the difference was. It can be confusing, because they’re often used interchangeably. However, there is a difference between life insurance and life assurance. We'll discuss both of them, to find out which is best for you.

What is life insurance?

Life insurance is designed to provide a financial safety net for your loved ones when you die. There are different types of life insurance, with each offering a different level of cover. Life insurance pays out a tax-free cash lump sum to your named beneficiaries, who can use the payout however they like. People often use them to pay off a mortgage or other debts, but it can also be used to cover living expenses for family members or simply left as a cash gift.

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.

Compare great-value life insurance quotes from 22 trusted providers[1] including:

[1] Correct as of December 2022.

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

The main difference is that life assurance covers you for your whole life, whereas 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.

Life assurance vs life insurance, in a nutshell:

Life Assurance

Life Insurance

Meaning:

An ‘assurance’ that you’ll receive a guaranteed payout, no matter when you die 

Meaning:

Usually covers you for a set number of years (known as the ‘term’) 

No age limit

You can get life assurance at any age, no matter how old you are

Age limits can apply

Some providers will only cover you up to 75 years old

Particularly suited to:

Over 50s, covering funeral costs 

Particularly suited to:

New parents or mortgage holders 

Less flexible

Only available as level or increasing term 

More flexible

Can be tailored to cover specific payments like your mortgage or to cover your dependents 

Medical info may not be needed 

Some over 50s whole of life cover doesn’t involve medical questions, so acceptance can be guaranteed 

Medical info usually required 

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

Can be invested 

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

No investment option 

The lump sum pay-out stays the same, or can be set to decrease in line with your mortgage balance 

Cost:

As the pay-out is guaranteed, premiums can be more expensive. 

Cost:

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

Life insurance vs life assurance: which is best for me?

If you’re weighing up life assurance vs life insurance, and aren’t sure which is right for you, you need to think about your personal situation.

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. If you live long enough to cover those payments yourself, you may have paid out more than the policy is eventually worth. On the other hand, if you want to leave the people you love a guaranteed inheritance, life assurance may be worthwhile.

It’s worth knowing that over 50s life insurance policies often cover life assurance. As long as you keep up with your premiums, an over 50s life insurance policy guarantees a payout upon death.

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. 

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.

It could help to talk to a financial expert who can take you through your options.

What are the main types of life insurance?

There are many types of life insurance policy. Here are the three main policy types:

  • Level-term life insurance – this insurance covers you for a set period for a set amount of cover that’s paid as a tax-free lump sum in the event of your death.
  • Decreasing-term life insurance - similar to a level-term policy, but the payout amount decreases over the term of the policy. For example, the payout after 15 years would be smaller than after five years. These are often used to cover a repayment mortgage.
  • Whole of life insurance – this is a type of life assurance. It offers a guaranteed payout, because, as long as you keep up with your premiums, the policy covers your entire life.

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 £3.56[2] for 10% of our customers, it could make sense to start your life insurance quote with through us. 

What’s more, it could take only 4 minutes[3] to do a comparison with our panel of providers. We’ll clearly lay out how much each policy might cost.  

[2] 10% of our customers were quoted less than £3.56 per month/year for their life insurance for a 10-year term, up to £100k worth of cover and no critical illness cover in November 2022.

[3] Correct as of December, 2022.

How much does life insurance cost?

There are various factors that are considered when calculating the cost of a life insurance quote. Here’s a breakdown of average quotes for a 10-year decreasing term life insurance policy, based on Comparethemarket data:

Customer type Cover amount Monthly premium
Under 30s (non-smoker) £100,000 £3.50[4]
All customers £100,000 £14.60[5]
Under 30s (non-smoker) £175,000 £4.96[6]
All customers £175,000 £16.52[7]

 

[4] 51% of our under 30-year-old, non-smoker customers were quoted less than £3.50 per month/year for their 10-year decreasing term life insurance policy, up to £100k worth of cover, no critical illness cover in November 2022.

[5] 51% of our customers were quoted less than £14.60 per month/year for their life insurance for a 10-year term, up to £100k worth of cover and no critical illness cover in November 2022

[6] 51% of our under 30-year-old, non-smoker customers were quoted less than £4.96 per month/year for their 10-year decreasing term life insurance policy, up to £175k worth of cover, no critical illness cover in November 2022.

[7] 51% of our customers were quoted less than £16.52 per month/year for their life insurance for a 10-year term, up to £175k worth of cover and no critical illness cover in November 2022.

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 standard life insurance. These include your:

  • Age – the younger you are, the cheaper your premiums is 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 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, which is a type of income protection insurance.

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Author image Helen Phipps

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.”

- Helen Phipps, Finances expert

Frequently asked questions

Who needs life assurance?

You may prefer to take out a life assurance policy if the security of a guaranteed payout 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. This can make life assurance a more 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.

How does a life assurance policy pay out?

When the policyholder dies, the insurance provider should be contacted as soon as possible, 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.  

The person who will receive the lump sum depends on how the policy was set up. This can be: 

  • The beneficiary named on the policy
  • The executor of the policyholder’s estate
  • The surviving policyholder if it’s a joint policy
  • The trustees if the policy has been written in trust – they will then pass the money on to the named beneficiaries of the trust. 

Which other life insurance options are available?

Your personal circumstances will dictate the best life insurance policy for you. So you should think very carefully about your specific needs, whether it’s covering bills, childcare costs or a mortgage. You could also protect yourself against a future event, such as a critical illness or your own funeral expenses.

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 get more help on life insurance and life assurance?

Deciding between life assurance vs insurance can be a difficult and often complicated topic to broach. If you’re not sure what’s right for you, expert help and advice are available.

Life insurance – 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 – 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)

Page last reviewed on 03/02/2023
by Helen Phipps