Buying life insurance is a big commitment, therefore it’s best to learn about the options available. Life assurance is a popular alternative to a standard life insurance policy, but how do they differ? 

In this article, we’ll help you understand all there is to know about life assurance and why you might need it.

What if life assurance?

Life assurance (also known as whole life insurance) is a form of life cover providing financial protection for your family in the event of your death. Unlike a standard term life policy, life assurance covers you permanently, with no expiry date. 

When you die, your insurer pays out a lump sum payment to your loved ones, to support them during this difficult time. Life assurance is typically more expensive than life insurance due to its guaranteed payout. 

Once you’ve taken out a life assurance policy, you start paying monthly premiums to your insurer. If you fail to keep up with these payments, your provider may end your cover. In this case, you won’t be reimbursed for any of the premiums paid up to this point.

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Do I need life assurance?

None of us wants to leave our loved ones in a vulnerable financial position when we die. Therefore, if your family depends on you financially, then you will likely require life assurance.

Among many things, life assurance can help your family with finances such as:

Life assurance can also be used for estate planning purposes, helping you leave a legacy for your loved ones. 

The pay-out from life assurance is generally considered tax-free if the overall value of your estate is below the inheritance tax threshold (£325,000 - as of the 2021/2022 Tax Year). Some individuals who are concerned that their policy could be affected by inheritance tax consider writing their policy intro trust - for more information regarding what this means please see our writing your policy in trust page. 

What's the difference between life assurance and life insurance?

Though they both share the same goal - protecting your family financially, life insurance and life assurance have several differences. For starters, life insurance policies typically work on a term basis. Unlike life assurance, life insurance covers you for a set period of time rather than indefinitely, therefore your family can only claim if you die within the policy term. 

Here are the main features of these cover types:

Life assurance:

  • Premiums are usually high

  • Your family is assured of pay-out when you die (so long as you keep paying your premiums).

  • Can be used in estate planning

Life insurance:

  • Premiums are generally cheaper

  • Your cover has an expiry date (i.e. a fixed policy term)

  • Your family only receive a pay-out if you die within the policy term

Products & Services from the leading financial brands

  • Zurich
  • Legal And General
  • Aviva
  • AIG
  • Beagle Street
  • Canada Life
  • Cavendish Life Cover
  • LVE
  • Royal London
  • Vitality Life
  • Virgin Money
  • Budget Insurance

Types of life assurance

There are two types of life assurance - standard & maximum cover.

With standard cover, your payout value and premiums are fixed throughout the policy. Even as you get older and may experience health issues, the cost of your premiums remains the same.

Maximum cover works much differently in which your policy is linked to an investment fund. Each month your insurer invests the money from your premiums to cover the eventual payout.

There are positives and negatives associated with this cover type. If the investment performs, the bonus can be added to your policy. However, if it fails your insurer may increase your premiums to cover the loss.

Types of life insurance 

There are 3 types of term life insurance:

  • Standard term cover - Both your premiums and pay-out value are fixed throughout the length of your policy.
     

  • Decreasing term cover - This level of cover is taken out alongside large payments that your family would struggle to pay off alone such as a mortgage. Your payout value decreases over time as you make repayments on the amount owed.
     

  • Increasing term cover - The payout increases overtime to protect its value from inflation. The downside of increasing cover is that your premiums also rise.

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How much is life assurance?

While life assurance can be expensive, the permanent cover it offers provides your family with peace of mind. The cost of your life assurance policy generally depends on the amount of cover you take out.

The higher the pay-out value of your policy, the more expensive your premiums will be.  Therefore, it’s best to assess your family’s finances before you take out life cover. This way you can avoid taking out more cover than your family needs, saving you money on premiums.

Some other factors can affect the cost of your policy. When you apply for cover, your insurer will ask you some questions, such as:

Age and health are the two main factors when buying life cover. As you get older, the cost of life insurance, in general, rises significantly. 

If you’re looking to save money, it’s best to buy cover at the earliest stage. This way your premiums remain fixed even as you get older and develop health conditions.

Can I get cover for more than one person?

Joint life assurance allows two people to share cover under a single policy.  Many couples opt for a joint policy as it can often work out cheaper and easier to manage than individual policies. 

For more information on joint life cover, please read our article - How does joint life insurance work?

Speak to an adviser about Whole Life Insurance today

Our team of friendly and professional advisers are on hand to help with any questions you may have regarding Whole Life Insurance.

The advisers will make recommendations tailored to your current situation and will research the market on your behalf, ensuring you secure the cover you need and supporting you every step of the way. 

01392 436 193 (Monday to Friday, 9am - 5.30pm)

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