Life insurance and life assurance are often used interchangeably, but they do have distinct differences. Both serve as forms of financial protection in the event of the policyholder’s death, but they operate differently. The primary difference lies in the duration of coverage: life insurance typically covers a specific term, while life assurance generally provides coverage for the policyholder’s entire life.

Life Insurance

Life insurance offers a tax-free pay-out to the chosen beneficiary if the policyholder passes away during the policy’s term. Common types of life insurance include level, increasing, and decreasing cover.

• Term Coverage: Life insurance is designed to provide coverage for a set period, often aligned with financial commitments like a mortgage. Premiums are paid for the policy’s duration, and coverage is in effect during this term.
• Variety of Cover Types: Different types of life insurance cater to specific needs. Level cover maintains a consistent pay-out amount throughout the policy term. Increasing cover adjusts the coverage amount to account for inflation, while decreasing cover decreases the coverage amount as the policyholder pays off loans like a mortgage. 

The choice between these types depends on individual circumstances, with factors like the need for consistent coverage or changing financial obligations influencing the decision.

Life Assurance

Life assurance, also known as ‘whole of life ‘ cover, shares the objective of providing a tax-free pay-out to beneficiaries upon the policyholder’s death. However, it differs in several key aspects.

• Lifelong Coverage: Life assurance policies offer coverage for the policyholder’s entire life. This certainty of a pay-out makes it a guaranteed form of protection.
• Premiums: Life assurance policies typically involve higher premiums compared to life insurance due to the lifelong coverage guarantee.
• Coverage Adjustments: While some life assurance policies allow for coverage increases, they generally do not provide options for coverage decreases. This ensures that the policyholder remains covered throughout their life.

Choosing between life insurance and life assurance depends on individual circumstances. If the goal is to secure financial obligations like a mortgage and coverage is only needed for a specific period, life insurance may be suitable. Conversely, for those seeking lifelong coverage and the assurance of a pay-out regardless of when they pass away, life assurance is a viable option.

Important considerations when purchasing life insurance include understanding that coverage is contingent on the policy term, no refunds are provided if the policyholder outlives the term, premiums must be consistently paid to maintain coverage, and successful claims result in the termination of the policy.