The terms "life assurance" and ‘life insurance’ sound similar, but they actually refer to two different types of financial protection. While they both cover death, they work slightly differently and therefore offer different purposes. We'll look at the main differences between these types of cover to help you understand which one might be the best fit for you.
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What is life assurance?
Life assurance typically offers a guaranteed payout upon your death, regardless of when that may occur. This can provide peace of mind knowing that your family/loved ones will be financially protected, no matter what happens.
By 'assurance', it means that the policy will definitely pay out at some point, as long as the terms of the policy are met. Life assurance policies are usually taken out for a longer term, often spanning decades. It is also referred to as 'whole life insurance' - because it is designed to protect you for the remainder of your life.
Please note that a payout is only guaranteed as long as you keep paying your monthly premiums for the policy.
Due to the nature of the policy, it can be possible to pay more in premiums than you are insure for. For that reason, we’d recommend speaking to an insurance adviser to ensure the plan is right for you.
You can speak to our expert team on 01392 436193 (Monday - Thursday 9am - 5pm, Friday 9am - 5pm)
What is life insurance?
When comparing the two, life insurance usually refers to ‘term life insurance’. This is where you agree with the insurer to take out cover for a set period, usually between 5-50 years.
If the person insured passes away during the policy term, the insurer will issue a payout to their family/loved ones. However, if they survive the term, the policy expires, and they will not receive a payout.
There are three types of term life cover:
Level - where the policy premium and payout amount remain fixed throughout the policy.
Decreasing - where the policy is used to cover a specific debt, like a mortgage. The payout decreases over time as the debt is reduced. The premiums for this policy are fixed, but are usually cheaper than level term insurance.
Increasing - where the payout amount increases over time to account for inflation or other factors. Because the payout increases, the premium will also rise.
Term life insurance is often cheaper than life assurance, because it only provides cover for a set amount of time. However, there is no guarantee that the policy will payout.
Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums, your cover will stop, your policy will end, and you will receive no benefit. If you have a term life insurance policy and have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.
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What is the difference between assurance and insurance?
While both of the policies cover death, they each have significant differences.
Life assurance:
- Protects you for the rest of your life (as long as you pay your premium)
- Provides a guaranteed lump sum payout
- Is usually more expensive, but offers permanent protection
- Cover usually falls under one type of policy
Life insurance:
- Provides cover for a specific time
- May not payout if the policyholder outlives the term
- Can be more affordable than life assurance, but doesn't offer permanent cover
- Offers more flexibility in terms of types of cover
Who needs cover?
Everyone has their own reasons for needing life cover, whether it's to protect their family/loved ones financially in the event of their death or to cover specific debts like a mortgage.
Anyone with dependents or financial responsibilities should consider taking out life cover. The type of cover you choose will depend on your individual circumstances and needs.
If you're a parent or guardian, then having protection in place can mean your children are more financially secure if you were to pass away. If you are married, your partner or spouse can use the money from the payout to cover any expenses that may arise. Or if you want to cover end of life expenses like funeral costs, it can help save your family/loved ones money.
Businesses can also benefit from life cover, as it can help protect against the financial impact of losing a key employee or partner.
If you are looking to cover more than one person, joint life insurance may be a good option. This type of policy protects two people under the same policy, which may be cheaper than taking out separate policies.
Which type of policy should I choose?
This usually comes down to one question - what are you buying protection for?
You may need “life assurance” if you:
Need permanent cover
Wish to have a guaranteed payout upon your death
Have dependents who rely on your income for their financial security
Intend to use the policy as inheritance for your children/grandchildren
Don't mind paying more for cover
Intend to use the policy for tax planning
You may need “life insurance” if you:
Only need cover for a specific period of time (such as until your mortgage is paid off)
Are primarily concerned with covering mortgages or other debts
Want a more affordable option for financial protection
Wish to have flexibility in terms of coverage and premium payments
Are comfortable with the possibility of not receiving a payout if you outlive the policy term
Have adequate savings or investments
Are looking for cover tailored to family milestones
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Ideally, you’ll want to think about your situation and financial goals before you decide on a policy. Life assurance may provide more peace of mind, while life insurance may offer more affordable options and flexibility.
How much does cover cost?
Once you take out life insurance, you are required to pay monthly premiums in order to keep the policy active. As with any insurance product, the cost of your premium will vary depending on several factors:
Age - younger people typically pay lower premiums
Health - your medical history and current health condition can impact the cost
Lifestyle - factors such as smoking, drinking, and participation in risky activities can affect the premium
Cover amount - the higher the payout amount, the higher the premium
Policy term - longer terms usually have higher premiums
Type of cover - level, decreasing, or increasing cover will impact the cost
If you choose life assurance, you can expect to pay more each month for cover. Premiums usually cost less each month for life insurance, as you are only covered for a limited time. However, there are ways to lower your premiums, see - How to buy life insurance on a budget.
How can I buy life assurance or life insurance?
At Cavendish Online, we offer 3 routes to buy low-cost life assurance/life insurance:
Route 1 - Apply for a quote online:
Apply for a low cost online quote option for life insurance. With our lowest premiums, you can get a quote and apply online, making all the decisions yourself. You could be covered within 30 minutes.
This route is best for those who know exactly what they need, are generally in good health, and feel confident to write their policy in trust.
Route 2 - Quote & apply with guidance:
If you need help from an expert to select the best policy and are generally in good health or have minor health issues, this is the option for you. Our experts will assist you in finding the most suitable policy for your needs, and can get you covered quickly.
You can call our guidance team on 01329 248735 (Monday to Thursday 10am – 7pm, Friday 10am – 6pm)
Route 3 - Get advice:
Recommended for those who have medical disclosures (whether they are well managed or not) or hazardous occupations. By choosing this route, you can request a callback to receive personalised advice on life insurance options. Our advisers can then help you find the most suitable and affordable policy for your needs.
At Cavendish Online, when you buy with one of our advisers, we’ll automatically place you on an annual review scheme. We’ll get in touch every year to check that your policy is still adequate, and look into alternatives if it’s not.
You can call our advice team on 01392 436 193 (Monday to Thursday 9am – 5.30pm, Friday 9am – 5pm)
