Life insurance vs life assurance

There are big differences between life insurance and life assurance. We want you to have all the information you need to make an informed decision about which is most appropriate for you.

life insurance options

Life insurance and life assurance sound very similar and do very similar things, but they are very different products. They each offer unique features that will have advantages for some people and disadvantages for others. If you are considering taking out a life policy, we’ll explain the key differences between insurance and assurance so that you can assess which is better for you.

Differences between life insurance and life assurance

Assurance is designed to protect against events that will happen, whereas (in general) insurance covers you in case an event happens. 

So how do life insurance and life assurance differ? When it comes to life cover, the two terms are used almost interchangeably. In fact, more common names for these products are ‘term life' and ‘whole of life’. However much we don’t like to think about it, it is certain that we are going to die, as its name suggests, whole of life insurance (or life assurance) covers you for your entire life; there is no end date attached to the policy. So life assurance guarantees a payout on the death of a policy holder (providing premiums are maintained and the policy is valid).

Term life insurance, by contrast, specifies a length of time for your life to be insured for (otherwise known as the 'term' of the policy) . There will be a maximum number of years your policy can run for, meaning that the insurer only pays out if you were to die within the life of your policy.

What are the advantages of term life insurance?


It’s worth mentioning that both life insurance and life assurance share the same persuasive advantage: providing for your loved ones when you’re gone, and the peace of mind that brings.


Much will depend on your stage of life and what you intend the insurance payout to cover should you die. For a young, healthy person, term life insurance is a consideration when buying a house or starting a family.

Decreasing Cover

Decreasing cover is a form of term life insurance that stays equal to the size of your repayment mortgage. It is designed to expire at the same time your mortgage is fully repaid, and has the advantage of covering this expense if you were to die during the term of your policy. The payout amount decreases in line with your mortgage, however your premiums will remain the same throughout.

(Decreasing cover usually has an interest rate cap, meaning that if your mortgage’s interest rate is higher than your insurer’s cap, the payout might not completely cover your outstanding repayments.)

Level Cover

Level cover offers a payout of a specific amount. If you have calculated your family’s cost of living and know what they would need to continue life as they know it without your input, then level cover can provide peace of mind that they will not need to undergo dramatic upheaval should you die.

Increasing Cover

Increasing cover has the same basic principle as level cover, however it is index-linked and so rises with inflation. Indexes track the relative costs of goods and services to chart the changing buying power of a currency (‘inflation’). Money tends to be worth less over time (think about the cost of a chocolate bar ten years ago compared to now), and so increasing cover uses the interest rate to increase your payout size to give you the same relative value as when you took out your policy.

Increasing cover will also mean periodically increased premiums with most insurers.

While everything depends on a person’s unique circumstances, it is generally the case that for the same value of payout, decreasing term policies pay the lowest premiums and increasing term pay the highest.

What are the advantages of life assurance (whole of life insurance)?

It might seem at first that, given the main difference between life insurance and life assurance, the latter is more tempting. Since the policy does not expire, there is no risk of you dying after the end of your contract and not receiving a payout. Yet due to this, premiums for lengthy life assurance policies (or those with large payouts) tend to be significantly greater than those of term life policies.

Policies designed for people entering later life (usually entitled things like “over 50s life insurance”) are usually whole life policies that payout regardless of how long you live after you have taken out the cover.

Most often, this type of policy is used to contribute towards funeral expenses, pay outstanding debts or leave as a gift to family. Payouts are too small to contribute meaningfully to a mortgage, but some have the benefit of having a fixed length with respect to your contributions. Post Office Over 50s Life Insurance, for example, enables you to stop paying your premiums after 30 years, or on your 90th birthday (or subsequent policy anniversary; whichever is soonest).

Your cover is still in place and will remain so until you die, but the premiums no longer need to be paid.

Which is right for me?

Whether to choose life insurance or life assurance needn’t be as confusing as their names might imply. With the above information and based on your stage in life and plans for the future, we hope that you’ll be able to make a choice between insurance and assurance that is right for you. Post Office offers serveral life insurance options that might be right for you, if you’d like to discuss your options with an advisor in more detail, contact our team on 0330 123 3947.

If you’re convinced that you need life insurance, then consider a life cover policy from the Post Office.

Other ways to get covered

Post Office Life Insurance

Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.

Find out more

Post Office Over 50s Life Insurance

If you're aged between 50 and 80 Post Office could help you to leave your family the gift of a cash sum or help towards your funeral costs

Find out more

 

Post Office Free Parent Life Cover

If you have children aged under four years old, you could get £15,000 of life cover free for a year. That's £15,000 each for mum and dad.

Find out more

Post Office Critical Illness Cover

Get extra protection and financial peace of mind by adding the optional Critical Illness Cover to your Post Office Life Insurance.

Find out more

Still have questions?

You can find more information on life insurance by visiting Post Office life insurance guides and articles.

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