They may sound the same, but there are some key differences between life assurance and life insurance. In this guide, we'll look at what features each one offers offer and talk through which one is right for your needs.
What’s the difference between life assurance vs life insurance?
Both policies provide you with life cover, but they do so in different ways.
Life assurance offers lifelong cover and guarantees a pay out when you die, whereas life insurance offers cover for a set amount of time (the policy term) and pays out if you die while the policy is active.
Below are the key differences between each policy:
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Your cover will last for the rest of your life.
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Your cover lasts for a set amount of time.
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A pay out is guaranteed when you pass away.
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A pay out is made if you die during the policy term.
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It's often used to help cover funeral costs
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an inheritance or inheritance tax bills.
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You can use it to help cover a mortgage
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other debts or family living costs.
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You might not need to give medical information if you opt for an over 50s plan.
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You’ll need to give medical information during the application process.
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It doesn’t include extras like terminal illness cover.
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Includes terminal illness cover as standard. You should make an early claim if you’re diagnosed with a terminal illness.
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It can be expensive as you’ll need to pay premiums for the rest of your life.
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It's often one of the cheapest forms of cover. Premiums could start from just £3.50 per month***.
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***Cheapest quote offered on a 25 year policy with £100,000 of level cover for a 20-year-old non-smoker in good health. Based on Conufsed.com data August 2024.
What is life assurance?
Life assurance offers cover for the rest of your life and pays out to your loved ones when you die.
It’s referred to as 'life assurance' as you’re ‘assured’ (or guaranteed) to get a pay out when you die.
Life assurance policy options include:
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Whole of life insurance
Whole of life insurance lasts for life, guaranteeing a pay out to your family when you die.
You’ll need to answer medical questions during the application process so that insurers can calculate your monthly life insurance premium.
For this reason, whole of life insurance is often well suited to those who are later in life but still in good health.
The pay out from whole of life insurance is most commonly used to cover funeral costs, provide an inheritance or cover inheritance tax bills. This is sometimes known as a policy that's written in trust.
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Over 50s life insurance
Over 50s life insurance (also known as an over 50s plan) is technically a form of life assurance. This is because a payout is guaranteed to your loved ones after a waiting period. This is usually 12 or 24 months after the policy has started.
An over 50s plan offers guaranteed acceptance for UK residents aged 50 – 85, without the need to answer any medical questions.
As you don’t give any medical information, insurers tend to offer a small amount of cover (often between £10,000 - £20,000).
What is life insurance?
Life insurance covers you for a set amount of time and pays out to your family if you die while your policy is in place.
The period of time you’re covered for is known as the policy ‘term’, for this reason it’s also known as ‘term life insurance’.
There are different types of term life insurance available to meet different needs and budgets.
Life insurance policy option include:
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Level term life insurance
Pays out a fixed sum of money if you die during the policy term.
This means that the amount paid out to your loved ones doesn’t change overtime, it will always remain the same.
It’s commonly used to help protect an interest only mortgage, other large debts and family living costs.
You’ll need to answer medical questions during the application process.
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Decreasing term life insurance
Pays out an amount that reduces over the policy term.
This means the further you get into your policy term, the less it will pay out if you die.
It’s a popular choice for helping to cover a repayment mortgage as your cover amount can reduce at the same rate.
You’ll need to answer medical questions during the application process.
What’s better, life insurance or life assurance?
It’s not always a case of one being better than the other. You should really be asking ‘what's better for me?’. To work this out, there are a few factors to consider:
What's your budget?
Due to offering lifelong cover and a guaranteed pay out, life assurance policies tend to be more expensive.
You’ll also need to keep up with monthly premium payments for the rest of your life.
Life insurance tends to be cheaper as cover only lasts for a set amount of time and you only have to pay premiums during this time.
Whatever protection you buy, it needs to be affordable. There’s no point buying a policy that doesn’t fit into your budget as if you stop paying your premiums, your cover will also stop.
What do you want to cover?
What you want to protect can help you work out how long you'll need cover for.
If you want to make sure you're covering the cost of your funeral, life assurance can help you guarantee a pay out for your loved ones.
Whereas if you want to protect your mortgage to keep your family in their home should the worst happen, a life insurance policy can run alongside your mortgage term and mirror your remaining balance.
What stage of life are you at?
If you’re young and in good health you can benefit from cheap term life insurance premiums.
However, if you take out whole of life insurance at a young age, you’ll need to pay premiums until you die. This means you could end up paying more in premiums than the policy pays out.
Whole of life insurance could be a good option if you're older and still in good overall health. That's because you could buy a higher level of cover than with an over 50s plan.
If you're over 50 and living with a health condition, an over 50s plan could allow you to secure a policy without having to give medical information or go through a medical exam.
What are the pros and cons of life assurance and life insurance?
| Pros | Cons | |
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Life assurance
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Life insurance
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Is life assurance worth it?
As life assurance lasts for life and you’ll need to pay premiums for the rest of your life, you may wonder whether it’s worth the investment.
Ultimately, it will depend on your needs and what you want to cover.
If you want to guarantee your loved ones a payout it could be worth it.
Alternatively, if you just need cover for a certain amount of time, then a life insurance policy could be more suitable.
Tips on choosing between life assurance and life insurance
Hopefully you've got a better understanding of life assurance and life insurance after reading this guide.
Here are some tips you might want to consider when making your final decision:
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Think about your budget. Could you afford to pay premiums for the rest of your life for a life assurance policy.
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Consider why you're buying cover. If you want to protect debts (like a mortgage), you may only want cover during this time.
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Seek out help if you need it. Remember you're not alone. There are many experts out there that can give you all the information you need on both policies.
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Compare quotes. Whether you want life assurance or life insurance, comparing policies can help you save money. Why not use Confused.com to compare life insurance from leading UK insurers?
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