A common question in the world of insurers is what’s the difference between life assurance vs insurance.
Although the terms are used interchangeably in many parts of the world, technically speaking, they do not mean the same thing.
Life assurance Definition:
An agreement between a life assurance company and a policyholder; in return for a payment from the policyholder, the company commits to pay someone or something upon the death of the person whose life is being covered.
Life Insurance Definition:
An agreement between a life insurance company and a policyholder; in return for regular payments, the company commits – for a specific period of time – to provide insurance cover to the policyholder, paying a given sum in the event of their death. At the end of the term, the policy ends and has no residual value.
The main difference between life assurance and life insurance is that life insurance covers you for a set term, whereas life assurance covers you for your whole life.
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, as long as you have paid all of your premiums. Life assurance is a vital tool for wealth management and tax planning. Life insurance is designed to pay out a lump sum if you die during the term of the policy.
The decision whether to go for life insurance or life assurance will depend on your circumstances and what you are looking for from this type of cover. Learn more here.
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