Important: This article uses the traditional definitions of life insurance (for a set term) and life assurance (for whole of life). However, please be aware that many providers use these terms interchangeably. It is common to find ‘Term Assurance’ policies that only cover a specific period. Always check the features of a policy to make sure it provides the cover you need.
Understanding the differences between life insurance and life assurance is important when you’re planning to protect your loved ones financially. Understanding these differences can help you make the right choice for you or your family.
This guide explains what each one covers, how long it lasts, and which might be best for you.
Life assurance and life insurance: the basics
Both life insurance and life assurance offer financial security for your family if you die. However, they work differently.
Life assurance is a guarantee that your loved ones will receive a payout when you die.
Life insurance covers you for a set period, like 10, 20, or 30 years.
What is life insurance?
Life assurance, also known as “whole of life” insurance, covers you for your entire life. If you keep up with your premiums, your loved ones are guaranteed a payout when you die.
Life assurance is often chosen for:
- Covering funeral costs.
- A guaranteed payout to support your family or loved ones.
- Potential to leave money or inheritance for your children or grandchildren.
Because it’s designed to pay out no matter when you die, life assurance offers long-term financial security and can be a valuable part of estate planning.
Life assurance vs life insurance: the differences
It’s easy to confuse these products, but understanding the difference between life insurance and life assurance is essential for choosing the right cover.
- Coverage: Life insurance covers you for a set term, while life assurance covers you for your whole life.
- Payout: Life insurance pays out only if you die within the policy term. Life assurance guarantees a payout whenever you die, if you maintain your premiums.
- Cost: Life assurance typically has higher premiums than life insurance because it guarantees a payout.
This table compares the difference between life insurance and life assurance:
| Life Assurance | Life Insurance | |
| Coverage | Whole-of-life with a guaranteed payout upon death | Pays out if you die within the policy term |
| Duration | Indefinite | Fixed term (e.g., 10, 20, 30 years) |
| Purpose | Cover funeral costs or leave cash gifts behind | Cover mortgage, provide for dependents, reduce financial strain on your loved ones |
| Investment options | May offer investment options for higher lump sum payout | The lump sum payout stays the same, or you can choose for it to decrease with your mortgage balance. Fixed term policies do not include investment options |
| Payout | Whenever you die | If you die within the policy term |
Choosing the right type of cover depends on your individual needs and circumstances.
Which policy is right for me
When choosing between life insurance and life assurance, consider the following points:
- Your family: If you have a young family who depend on your income,, life insurance can provide security. Many people take out life insurance to cover their mortgage if they die.
- Your age: If you’re over 50, a whole-of-life policy might be more suitable. It guarantees a payout for your loved ones and can help cover funeral costs.
- Your budget: Life assurance generally has higher premiums than life insurance.
But is over 50s life insurance worth it? Ultimately, the best choice depends on your individual needs and goals. Thinking carefully about your circumstances and what you want from your policy can help you make the right decision.
To understand more about how your age might influence your decision, read our guide on what time of life it’s best to take out life insurance.
Which policies do Shepherds Friendly offer?
If you think life assurance is right for you, Shepherds Friendly offers Over 50s Life Insurance. This provides “whole-of-life” cover with guaranteed acceptance for UK residents aged 50 to 80 without a medical. It’s designed to help you leave a cash lump sum for your loved ones, cover funeral costs, or provide you with extra peace of mind.
To learn more about how it works and apply online, visit our Over 50s Life Insurance page.
Life assurance vs life insurance – a summary
We’ve covered a lot in this post, so here’s a quick recap of the key differences between life insurance and life assurance policies.
- Life insurance provides cover for a set period, while life assurance covers you for your whole life.
- Life insurance offers a payout if you die within the policy term; life assurance guarantees a payout whenever you die.
- Life assurance often has higher premiums than life insurance.
Ready to explore your options? Find out more and get a quote today.
If you’re unsure whether a policy is right for you, you should get professional financial advice before making a decision.
For more helpful information and guidance, check out the other articles on the Shepherds Friendly blog.
