What is Life Assurance?
A life assurance policy is an on-going policy with no fixed term that gives both you and your loved ones peace of mind that when you die a lump sum will be paid out. This is the fundamental difference between life insurance and life assurance;
- Life insurance policies are taken out for a fixed period of time. If during that time you die the policy will pay-out to cover your debts, however if you out survive the policy you receive nothing.
- Life assurance policies, often known as “Whole of Life Policies” offer you protection for life and do pay-out eventually – when you die!
How Does Life Assurance Actually Work?
Whole of life assurance policies are a mix of life cover and investment. When you die the life assurance policy will pay-out either the policies investment value or the guaranteed minimum payment as specified within the original policy – whichever is higher then that is the amount that you will receive. And if when the policy comes to an end you are still living you receive an even bigger amount as you will be awarded an extra bonus known as “terminal bonus”.
It is because of these end of policy guaranteed pay-outs and other optional extras that make life assurance more costly than life insurance.
Life Assurance Annual Bonuses
Based on the life insurance companies investment performance a bonus is added to the value that is guaranteed upon your death – so year on year the value of your life assurance policy increases.
It is important to bear this in mind – the value of the investment portion of your policy is dependent upon the success of your insurance company in investing and also the amount of time over which you have been paying your premiums.
Types of Life Assurance Policy
There are several different types of life assurance policies / whole of life policies available, for example;
- Maximum Whole of Life Assurance.
- Balanced (Standard) Whole of Life Assurance.
- Guaranteed Whole of Life Assurance.