The terms life insurance and life assurance are often interchangeable and both are often known simply as ‘life cover’.
People often ask what the difference is, so here’s how it works:
Life insurance is cover you take out for a set number of years. You agree to the term of the policy at the outset, usually between 10 and 25 years. That’s why you’ll often find this type of policy referred to as term insurance.
Most people tailor their policy to ensure that their financial commitments would be met in the event of their death, so policies are often aligned with the term of a mortgage or other loan. Banks and building societies usually require some form of life insurance as a condition of granting a mortgage.
Families often opt for life insurance to cover them whilst the children are growing up, taking a policy that will end when they become financially independent. With life insurance, you aren’t guaranteed to receive a payout as you could outlive the term of the policy. However, what you do get is the continuing peace of mind and the guarantees that protection policies give you and your family.
Life assurance, by contrast, is designed to provide cover until you pass away. It can be more expensive than life insurance as it covers you for a longer-term and pays a lump sum in the event of death, whenever that occurs.* You may have heard the phrase ‘whole life’ or ‘whole of life’ used in relation to this type of policy.