Life assurance vs. life insurance

Life assurance usually refers to whole of life cover. In the event of a valid claim, your policy will payout whenever you die, because the policy lasts for your entire lifetime. This typically means life assurance premiums are higher. 

Life insurance is also known as term life insurance. It covers you for a set period such as 10, 20, or 40 years and only pays out if you die during that term, and a valid claim is made. If you outlive the policy, there’s no payout, which is why it tends to be cheaper.

Life assurance can be another way of describing a ‘whole of life’ policy. An insurer may refer to life assurance, meaning the cover is indefinite, with no fixed expiry date, unlike a life insurance policy term. The word ‘assurance’ is used because you’re assured that a valid claim will be paid regardless of when you die, so long as you pay your premiums.

Life insurance usually means that you are covered for a certain amount of time. When you apply, you choose the ‘term’ of the policy, such as 25 years. If you die within the term chosen, your loved ones could receive a cash sum. However, if you survive the term, the policy will end and no cash sum will be paid out.

Life assurance

• Whole-of-life cover, with a payout ‘assured’, upon death.
• You pay more due to the indefinite length of the policy.
• Some policies can include an investment element and are sold through advisers.

Life insurance

• Cover applies over a chosen policy length.
• Payout available only if you die within the length of the policy.
• Monthly premiums are often cheaper.

Learn more about life insurance

These definitions are intended to be a rule of thumb, so make sure you have all the information you need from your provider or adviser before you decide what type of policy meets your needs.

Life assurance (whole of life) policies provide cover for your entire lifetime, with no expiry date. As long as premiums are paid, the policy will pay out whenever you die. 

In the event of a valid claim the payout is guaranteed, which means premiums are typically higher than they are for life insurance.

The payout is usually free from income and capital gains tax, but it may be subject to inheritance tax unless the policy is placed in a trust.

These policies are most commonly used in Inheritance Tax planning. If you’re interested in whole-of-life cover, it’s worth speaking to a financial adviser to find out if this is the right type of protection for you.

Everyone’s circumstances are different, but for a lot of people, life insurance provides the right level of cover with the most affordable premiums. Many of the key chapters of your life have a defined length of time, from a child finishing school to paying off a mortgage, and the benefit of term life insurance is that you can choose the amount of cover you need, and how long you’ll need it for.

While life assurance can meet all these needs you’ll pay higher monthly premiums for an equivalent level of cover. But if you're somebody that wants cover to remain in place for life and you're happy to pay premiums until you die, life assurance could be for you.

Life assurance can be a good option if you can comfortably afford higher premiums throughout your life. It offers guaranteed lifelong protection and ensures a payout whenever you die, provided premiums are paid.

This makes it useful for leaving a guaranteed legacy or helping with estate planning. Just remember an insurer may check a claim is valid before it's paid. That's why it's important to answer policy application questions honestly. If the policy is written into a trust, the payout can usually be kept outside your estate and may help your family meet any Inheritance Tax liabilities.