Is There A Difference Between Life Insurance And Life Assurance?
Even from just a very cursory scan of the internet and the wider media it is very clear that many Financial Advisors and insurance companies use the two terms on an almost interchangeable basis. However there is a subtle, but very important, difference between life insurance and life assurance.
A life insurance policy is usually taken out for a fixed period of time and is linked to another product such as a mortgage. If you were to die during the lifespan of the life insurance policy the insurance company would pay out a tax free sum to pay off the policy holders debts e.g. mortgage. Essentially it offers peace of mind for your family in that if you die within the set timeframe of the policy your debts are covered. However – if you outlive the term of the life insurance policy you receive nothing!
Another way of looking at it is that you are betting with the insurance company – your betting that you will die during the policy period and they are betting that you won’t!
As the name would suggest life assurance is about something which unfortunately we can all be assured will eventually happen to us – our death. Hence a life assurance policy pays out not if we die (as with life insurance which is set for a fixed term) but when we die. Life assurance policies are part insurance and part investment based – this means that over time they increase in value.
Is It Important To Distinguish Between Life Insurance And Life Assurance?
Despite the fact that the lines between life insurance and life assurance are becoming ever more blurred it is important to bear the fundamental differences between the two types of policy in mind as life assurance can be considerably more expensive. So look around, weight up all your options, read the fine print and seek financial advice to ensure that you get the right type of product for you at the best price possible.