Life insurance and life assurance are terms that are often used interchangeably – but is there a difference?

Both are forms of protection designed to pay out after the policyholder passes away – but they don’t work the same way. The key difference is that life insurance is designed to cover the policyholder for a specific term, while life assurance usually covers the policyholder for their entire life.

What is life insurance?

Life insurance pays out a tax-free sum to whoever you choose if you die during the term of the policy. The most common types of life insurance are: level, increasing and decreasing cover.

Life insurance covers you for a specific term, or amount of time. This is often the same amount of time as your mortgage, for example. You'll pay a premium for the term of your policy, and you'll be covered if you pass away during that term.

The different types of cover do pretty much what they say on the tin. Level cover gives you the same amount of cover for the whole term of the policy, whereas the amount of cover you have goes up with increasing cover (to account for inflation) and goes down with decreasing cover (to account for the fact that you’ve hopefully paid off more and more of your mortgage or other loan).

You can choose a product based on whether you want your cover to increase, decrease, or remain the same. If you choose increasing cover, your premiums will also increase. That could help you determine which of these types of life insurance suits your circumstances best. Remember, you’ll only be covered for the term of the policy Footnote [1].

Finding life insurance terms tricky to understand? Have a look at our life insurance glossary

What is life assurance?

Like life insurance, life assurance pays out a tax-free sum to whoever you choose when you die. However, life assurance usually covers the policyholder for their entire life – so it’s also known as ‘whole of life’ cover. Unfortunately, death is one of life’s certainties, so a payout is guaranteed – meaning that premiums for life assurance policies tend to be higher than for life insurance policies.

With life assurance policies, your cover can increase if you choose, but not decrease – and although your premium is likely to be higher, you have the peace of mind that comes with knowing you have cover for your whole life.

Which is right for me?

The cover that’s right for you depends on your circumstances, of course, but you can think about the differences between the two to help make your decision.

For example, if you want peace of mind that your mortgage will be covered if you were to pass away but feel you don’t require life cover after your mortgage is paid off, you may want to consider a life insurance policy. However, if you’d like to know that a lump sum will be paid out to your loved ones no matter when you pass away, you might want to consider a life assurance policy.

Our Life Insurance Plan is currently our only life insurance term product. If you think life assurance might be right for you, we also offer a whole of life plan: our Over 50 Life Insurance. 

If you're unsure which policies or services are right for you, we recommend paying for a financial adviser. If you don't have one, try

A few things to remember when buying life insurance –

  1. You're only covered for as long as your policy lasts
  2. If you're still alive when your policy ends, you won't get any money back
  3. Your cover ends if you stop paying monthly
  4. When you make a successful claim, your cover ends

Looking for life insurance?

Visit our Life Insurance page to see full details of the cover we offer.

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