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What is Life Assurance?
Life assurance sounds similar to life insurance, but they are not the same. While they both provide your loved ones with financial support when you die, life assurance works a little differently from insurance.
Life assurance is a policy that guarantees a payout, as long as you make the agreed monthly payments. With insurance, you only get a payout if you die while the policy is active.
The difference between life insurance and life assurance
If you’re thinking about taking out cover, here are the main differences to consider when deciding on the right policy.
Life insurance vs life assurance:
- Life insurance is term cover, meaning it protects you for a specific period, like 10 or 20 years. If you pass away during that time, your loved ones get a payout. If the policy ends and you still need cover, you can take out a new one
- Life assurance is whole-of-life cover. It lasts your entire lifetime and guarantees a payout when you die. Because of this, it generally costs more than life insurance
- Over 50s life cover is also a type of life assurance designed for people aged 50 to 80, usually offering a smaller payout to help with funeral costs or small debts
What are the advantages of life insurance?
Life insurance, otherwise known as term life insurance, can be a more affordable option, especially for young, healthy people. It can help protect your loved ones financially when they might need it most, like when buying a home or starting a family.
There are different types of term life insurance, including decreasing cover, level cover and increasing cover. We’ll run through the basics of each to help you understand how they work.
Decreasing cover
Decreasing cover is a type of policy that could help pay off a reducing debt, like a mortgage, if you pass away.
The payout amount gets smaller over time, just like the amount left on your mortgage. Your monthly payments stay the same. This type of cover is designed to end when your mortgage is fully paid off.
Decreasing cover usually has an interest rate cap. If your mortgage’s interest rate is higher than your insurer’s cap, the payout might not fully cover what’s left on your loan.
Level cover
Level cover pays out a fixed amount of money. If you’ve worked out how much your family would need to manage without your income, then level cover can provide peace of mind that they will be financially secure if you pass away.
Remember, inflation can reduce the value of your payout over time. The number will stay the same but, in the future, it might not buy as much as it does today.
Increasing cover
Increasing cover works like level cover but grows over time to keep up with rising prices. It increases each year, either by a fixed percentage or they’re index-linked, so rise with inflation.
For example, things like food and utility bills tend to get more expensive over time. Increasing cover helps make sure your payout has the same value in the future as it did when you first took out your policy.
Because the payout goes up over time, your monthly payments will also increase. But this can vary by insurer.
Generally speaking, while everything depends on a person’s unique circumstances, decreasing cover has the lowest monthly cost, while increasing cover costs the most.
What are the advantages of life assurance?
Life assurance, also known as whole of life insurance, guarantees a payout whenever you die, no matter when that is. This can be a good option if you want certainty that your loved ones will get a payout.
Compared to insurance, it’s usually more expensive each month, especially if you choose a high payout amount. This is because the cover lasts your entire lifetime.
For example, someone in their 30s and 40s might take out life assurance to help leave a financial gift or cover inheritance tax planning. You can usually choose cover amounts of £500,000 or more, depending on the provider.
What is over 50s life cover?
Over 50s life cover is a type of whole of life cover. It’s specifically designed for people aged between 50 and 80. Like life assurance, it pays out when you die, but the cover amount is usually much smaller. It’s often used to help with funeral costs, small debts or to leave a gift for family.
One key difference is that over 50s life policies don’t require a medical exam. This means you’re guaranteed to be accepted, regardless of your health and lifestyle, as long as you’re within the age range.
With over 50s life cover, you keep paying for your policy until you either reach a certain age (usually 90 or 95, depending on the provider) or until you pass away, whichever happens first. If you reach the age limit, you stop paying but the cover stays in place. This means your loved ones will still get a payout when you die.
Life assurance vs insurance - which is right for me?
Whether you are best suited to life insurance or life assurance depends on your age, personal situation, and what you want the payout to help with. Consider whether you need life cover for a specific term or for your entire lifetime, and whether you want to leave money for your family, to help with funeral costs or to cover something like a mortgage.
Key takeaways
- Life insurance protects you for a set period, like 10 or 20 years. It only pays out if you die during the policy term. If you outlive your policy, you’ll need to take out a new one for continued cover. There are different types of policies, including decreasing, level and increasing
- Life assurance lasts your whole lifetime and guarantees a payout to your loved ones. Life assurance does tend to cost more than insurance
- Over 50s life cover is a type of life assurance(or whole-of-life policy) with guaranteed acceptance and a smaller payout. It’s designed to help with funeral costs or small debts
Safeguard your loved ones' future with life insurance
Common questions about life cover
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Life insurance covers you for a set period, like 20 years. If you pass away during that time, your family gets a payout. If you live beyond that, the cover ends. If you want the cover to continue, you can take out a new policy.
Life assurance is often called “whole of life” cover. It lasts your whole life, so a payout is guaranteed whenever you pass away. That’s why life assurance is usually more expensive.
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The main things to think about are your age and health status, and what you want the payout to cover for your loved ones. If you want to help your family cover the mortgage when you die, a decreasing term insurance policy may be the right choice. If you want to cover long-term costs or provide a financial safety net for loved ones, a life assurance policy may be worth it.
Everyone’s needs are different, so it’s important to compare different insurance providers and check policies carefully so you can make sure the cover works for you.
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It depends on what you need.
Life assurance covers you for your whole life and pays out when you pass away. This can help your loved ones by giving them money when you’re gone.
With a life insurance policy, you’ll usually pay more but it gives lifelong protection. Unlike an insurance policy that only lasts a set number of years, life assurance doesn’t run out. That means you don’t have to worry about applying again when you’re older or if your health changes.
However, if you only want life cover in place while paying off a mortgage or raising a family, term life insurance might be a suitable option. That’s why it’s important to compare insurers, policies and quotes to find the life cover that best suits your needs.
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Life assurance can be worth it if you want to leave money for your family or cover funeral costs no matter when you pass away. But it’s usually more expensive compared to insurance so you need to decide if you can afford it long-term.
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Not necessarily. If your life insurance policy covers your needs, you might not need life assurance. But if you want lifelong cover with a guaranteed payout, you could consider switching to life assurance or having both types of cover.
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Yes, the older you are when you take out life assurance, the more expensive it will be. This is because insurers see older people as a higher risk. That’s why it’s usually cheaper to take out a policy when you’re younger.
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Yes, but it might cost more. Some insurers may ask about your health history and could increase your premiums or exclude certain conditions from your cover. If you have a serious condition, you may still find specialist insurers who can help.
Some life assurance policies, such as over 50s life cover, have no medical checks. That means you’re guaranteed to be accepted, even if you have a health condition. But remember, payouts are usually smaller than with other types of life insurance or life assurance.
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They can. A payout from either policy can help cover funeral costs, but it depends on how much cover you have and what your family chooses to spend it on. Some policies are specifically designed to help with funeral expenses.
Our life cover products
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Life insurance
Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.
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Over 50s life cover
If you're aged between 50 and 80, we could help you leave a cash sum for your family or towards your funeral costs.
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