Updated: September 04, 2019

What’s the Difference Between Life Insurance and Life Assurance?

What's the difference between life assurance and insurance? Find out which one is right for you by reading our in-depth comparison article

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: September 04, 2019

Although life insurance and life assurance are terms often used interchangeably, there are actually some key differences which are important to understand.

If you’re thinking of taking out life insurance and are wondering if you actually need life assurance, read on to find out how the two products differ and which one you really need.

What is the difference between life insurance and life assurance?

The main difference between life insurance and life assurance is:

  • Life insurance covers you for a specific term. The policy pays out if you die within that term.
  • Life assurance covers you from the time you take out the policy to the time of your death, whether that happens to be within weeks of getting the policy or decades later.
    Life assurance can also be known as whole-of-life insurance or permanent insurance.

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Which is better suited to me?

Which is more suitable depends on your own needs and circumstances. The most prominent indicator for which would be more suitable would be the reason you need the cover in place, for example…

  • If you’re looking to protect against a debt or liability that will be gone after a certain time i.e. a capital repayment mortgage, then life insurance would probably be the most appropriate because once the mortgage is gone then covering it would be redundant.
  • If you’re looking to protect against a debt or liability which will always be there i.e. an inheritance tax bill, then life assurance would probably be the more suitable option because it’s going to be there sooner or later so it’d be important to cover yourself for whenever it’s going to happen.

Pitching life assurance and insurance head-to-head: Quick fire pros and cons

If you’re short on time and want to understand the most relevant advantages and disadvantages of life insurance and life assurance, use our at-a-glance list of pros and cons table below..

Life Assurance

Pros

Provides peace of mind for you and your loved ones.

Pays out regardless of when you die.

Sometimes offered as an investment product.

Cons

Can be expensive due to expected long duration of.

Some insurers expect you to continue to pay regular monthly premium throughout your lifetime.

Life Insurance

Pros

Provides peace of mind for you and your loved ones.

As the more affordable way to protect your family in the event that you die

Cons

Pays out only if you die within the specified term of the policy.

If you still want cover when the policy expires, you’d need to apply for cover again.

The older you are when you take out insurance, the more expensive the premiums are likely to be.

Pros and cons of both

If you’re short on time and want to understand the most relevant advantages and disadvantages of life insurance and life assurance, use our at-a-glance list of pros and cons table below..

Life Assurance

Provides peace of mind for you and your loved ones.Can be expensive due to the expected long duration of the policy.

Pays out regardless of when you die. Some insurers expect you to continue to pay regular monthly premium throughout your lifetime.

Sometimes offered as an investment product.

Life Insurance

Provides peace of mind for you and your loved ones.Pays out only if you die within the specified term of the policy.

Is the more affordable way to protect your family in the event that you die.

If you still want cover when the policy expires, you’d need to apply for cover again.

The older you are when you take out insurance, the more expensive the premiums are likely to be.

Should I get life insurance or life assurance?

If you want to insure your life but aren’t sure whether to get a life insurance policy or a life assurance policy, you should seek expert advice.

The reasons behind needing the cover will influence which product is most suitable for you.

Also, your age when you start looking for life insurance or life assurance could make a big difference to the cost of your regular monthly premiums.

An insurance advisor can help you decide how best to insure your life and protect your family in the event of your death. Call 0808 189 0463 or make a quick enquiry to talk to one of the expert advisors we work with.

All the experts we work with are independent advisors with access to every life insurance and life assurance product in the UK. They’ll be happy to answer your questions and make sure you get the best deal possible on the right insurance product for your circumstances.

Using life assurance as an investment

Some insurers sell life assurance as an investment product. This kind of life assurance might be referred to as an endowment policy or investment-linked life assurance.

If you use life assurance as an investment, the monthly premium payments you make are divided up. A portion of the premium will be put towards the final payout, while the rest will be invested.

This kind of life assurance policy guarantees a minimum payout when you die, but the total lump sum will be determined by the performance of the invested funds in your policy. You may have heard them called “with bonus” or “with benefits” policies.

While this kind of investment-linked insurance can end up being valuable for some policy holders, the potential growth is not guaranteed and therefore your ultimate beneficiaries or named nominee might receive less than you paid in premiums during your lifetime.

Sometimes it’s possible to end this kind of policy early, so you can ‘cash in’ on the value of the investment. If you decide to do this, some insurers might apply an exit fee.

As with any investment product, it’s always important to remember that the value of the investment can go down as well as up and this may affect the final payout.

To learn more about using life assurance as an investment vehicle, speak to one of the expert independent advisors we work with.

Call 0808 189 0463 or make an enquiry for a free, no-obligation chat.

You’re not charged a penny, and advisors only get paid on successfully arranging the product you want.

What differences will I find between life insurance policy and life assurance?

As discussed above, the main difference between life insurance and life assurance policies is the term you are protected by the insurance cover.

  • Life insurance covers your life for a fixed term. This kind of insurance is often used alongside mortgages to protect your family against the risk of you dying with outstanding mortgage debt.
  • Life assurance covers you for your whole life and guarantees a payout when you die. Life assurance and whole-of-life insurance are often used to help cover their family’s inheritance tax (IHT).

What’s the difference between life assurance policies and non-life insurance policies?

While life assurance is an insurance product guaranteed to pay out in the event of your death, there are many non-life insurance products designed to protect you against other risks.

The list of non-life insurance products available is extensive.

Some examples of non-life insurance products include, but are in no way limited to:

Car insurance – protects you against accidents, vandalism, theft and fire damage.

Home insurance – protection for your home and property.

Health insurance – pays towards treatment, tests or surgery and medications.

Travel insurance – offers protection for accidents, ill-health, flight cancellations when travelling away from home.

Mortgage insurance – protects your mortgage payments.

Disaster insurance – offers some protection in the event of disasters such as flood, fire and earthquakes.

What’s the difference between life assurance and critical illness cover?

Life assurance pays out to your beneficiaries or named nominee when you die, whether that happens to be within weeks of taking out your insurance policy or decades in the future.

Critical illness cover provides financial protection if you’re diagnosed with a specific illness, medical condition or disability specified within the policy term.

If you make a claim against your critical illness cover, your policy will provide a tax-free lump sum (an amount defined at the outset of the policy) to the policy holder.

While life assurance guarantees an eventual payout when you die and life insurance will pay out a lump sum or regular monthly instalments should you die within the term of the policy, critical illness cover usually only pays out the full sum assured it will usually also cease.

Some life insurance policies will also pay out upon the diagnosis of a terminal illness, if doctors say your life expectancy is less than 12 months.

If you’re weighing up what kind of insurance you need to protect you and your family against death or critical illness, speak to one of the expert brokers we work with.

Talk to an expert advisor

Getting the right insurance cover will give you and your loved ones peace of mind, so it’s worth getting it right.

For a free, no obligation chat, talk to an expert advisor about the best life insurance product for you. All the advisors we work with are independent and have access to all the life insurance and life assurance products across the UK. Which means they can get you the perfect cover at the right price.

Give us a call on 0808 189 0463 or enquire online and we’ll match you with the right specialist advisor to get you the help you want.

Ask a quick question

We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in life insurance. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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