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.

Compare great-value life insurance quotes from 20 trusted providers [1] including:

[1] Correct as of June, 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. 

Is life insurance or life assurance best for me?

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. 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 can sometimes cover life assurance too.

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. 

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 £3.50[2] 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[3] to do a comparison with our panel of providers. We’ll clearly lay out how much each policy might cost.  

[2]10% of customers could achieve a premium of £3.50 per month for their life insurance for a 10-year term, up to £100,000 worth of cover and no critical illness cover. Based on Comparethemarket data from June, 2022.

[3]Correct as of June, 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 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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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 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.

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 – be it covering bills, childcare costs, a mortgage, or protecting 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?

Life cover can be a difficult and often complicated topic to broach. If you’re not sure what’s right for you, expert help and advice is 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 27/09/2022
by Helen Phipps