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Life insurance vs. life assurance: What is the difference?

Disclaimer: This guide is a resource if you are considering life insurance best-suited to your background, age, gender, or status.

The main difference between life insurance and assurance lies in the duration of coverage. Life assurance provides lifelong coverage and pays out upon your passing. Whereas life insurance has a specific term and will not pay out if you outlive the policy duration.

The purpose of both policy types is to provide financial protection to your loved ones after you pass away.

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Life assurance explained

Life assurance guarantees a payout after the insured person dies, regardless of when it happens. Here is what you should know about life assurance:

  • Insurance companies refer to this type of cover as ‘whole of life’ cover.
  • Because the cover lasts longer, premiums for life assurance tend to be higher than term life insurance. Life assurance policies can increase in coverage over time, but will not decrease.


Is life assurance right for me?

As with every insurance product, only you can make the right decision. However, it is good to understand all of the policy options to work out which is right for you.

  • Taking out life assurance is a long-term financial commitment. It is important to budget for your premiums and check you can afford to pay it.
  • This is a suitable choice for those that would prefer coverage that will not expire. So long as you continue to pay your monthly premiums. 
  • This type of insurance means that loved ones will get a lump sum pay-out when you pass away, regardless of when you die. If this is important to you, you could benefit from this type of cover.

However, if you only need cover for a set period of time, it might be more suitable to look into term life insurance.

What types of whole of life policies are there?


There are three primary categories of lifelong coverage available:

  • Over 50s guaranteed acceptance cover: This type of coverage is made for people over the age of 50.
  • Whole of life pure protection: Insurance providers will ask to assess your medical history during the application process. As a result, those with no medical conditions and a healthy lifestyle are ideal candidates for this type of cover.
  • Whole-of-life investment-linked: This policy type comes in two forms. With-profit policies involve insurance providers investing your premiums with the aim of generating returns to cover the final payout. Unit-linked policies allow you to select specific investment funds to buy using your premiums.
  • Whole of Life Policies with Critical Illness Cover: Some life insurance policies include critical illness coverage, which pays a lump sum if you are diagnosed with a specific illness.

Finding the right life cover policy can be a challenge with so much information to take in. We understand this, and that is why nowsure is here to help. Our services are free to use, and we have a team of dedicated agents ready to answer your questions when you need us.


How is life insurance different and how does it work?

Life insurance does not operate the same way as life assurance. Life insurance is a term policy which generally lasts for a set amount of time. If the policyholder dies within the contracted term duration, their loved ones would be paid a tax-free lump sum upon their death. However, there are several types of cover all with different terms, conditions, premiums, lengths and pay-out options.


The most common types of life insurance are:

Level-term: Level cover provides the same amount of coverage throughout the entire term.

Increasing term: Just as it sounds, this type of insurance can cost more over time and tends to correlate with inflation.

Decreasing term: Also known as mortgage life insurance, the level of cover decreases in time as a debt reduces.


Why do people choose a term life insurance policy?

Flexibility in terms: You have the flexibility to customise your insurance policy to match your needs. Whether you want coverage for 5, 10, 20, or 30 years, you can make the choice.

Affordability: Term insurance often comes with more affordable monthly premiums compared to permanent life insurance options. The reason for this is that there is no guarantee that the insurer will pay the death benefit. So, how do you decide which type of life cover is right for you? The outcome really depends on your individual circumstances. If you are seeking long-term security with guaranteed benefits, life assurance might be for you. On the other hand, if you only need coverage for a specific period, insurance policies offer more flexibility.

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Choosing the right life insurance policy for you

Choosing the right life insurance policy can seem like a daunting task. There are many different types of life insurance policies and each one has unique advantages and disadvantages.

The main goal of life insurance is to provide your family with financial support in the event that something happens to you. It's important to understand what kind of coverage you need in order to properly assess which type of policy would be best for your situation.

1. Assess your needs

You need to assess your, and your family's needs to determine what type of coverage will suit you best. There are several ways to figure out how much life insurance your family needs, but one thing is certain - the more prepared you are financially, the less likely it is that your family will be left without any sort of financial support after your death.

2. Calculate your affordability

Before you decide on a life insurance policy, it's important to calculate your budget. After all, if your outgoings are already high, a term policy may be more cost-effective than a permanent policy. However, a whole life policy may be more convenient due to the consistent premium amount, as this may enable you to budget more efficiently. 

3. Think about any pre-existing conditions

First, things first, don’t let any pre-existing conditions put you off applying for life insurance. There are hundreds of options out there, and it’s our job to help you find a policy that works. It’s vital that you are 100% honest and open about any medical conditions, as providers may make your claim invalid if you withhold any information. 


Who does life assurance payout to?

Life assurance is paid out to the chosen beneficiaries of the policy-holder, usually a spouse or children. The policyholder can also choose as many beneficiaries as they like.

Do I get any money back on life assurance?

Whole life insurance policy terms can include a cash savings aspect called the cash value, which can be borrowed from the policyholder. The cash value then earns a fixed interest rate. However, withdrawals and unpaid loans can lower the death benefits.

How long does life assurance last?

Life assurance supplies financial help to the loved ones of the policyholder upon their passing. This means that there is no end date. Term life insurance can last up to 30 years, but is completely dependent on the agreement between the policyholder and the insurer.

What can life assurance pay for?

Life assurance can be used for funeral costs, outstanding debts, mortgage payments, educational costs, and supply financial safety for your loved ones. It serves as a financial resource to cover various obligations that may arise after your passing

Commonly Asked Questions

Put simply, life insurance works by paying a premium each month to your provider, which you’ll have to keep up for the duration of your policy. On your death, the people named in your policy (called your beneficiaries) will receive a tax-free lump sum or regular payments. How much this is depends on the level of cover you have chosen. And, of course, it’s also on the proviso that you die within the specified term of your policy.

It’s always advisable to compare life insurance quotes before taking out a policy. You and your family’s individual circumstances will determine how much cover you need and what you’ll have to pay in premiums. Other factors that may impact your life cover quote include your age and medical history.

Generally speaking, your life cover should start as soon as your application has been approved. This means that your loved ones will receive a pay-out whether you die in the first, fifth, 15th or 25th year of your insurance, as long as the policy has not run its term.

In some instances, however, the terms and conditions of the policy state that a waiting period is in place, so always read the details carefully before signing. This can happen in the case of a death by suicide, for example, where an exclusion period of 12-24 months from the start of the policy may apply.

Compare multiple life insurance quotes to get a good idea of how much cover will cost you. It can start from as little as £5/month – possibly less than what you’re paying for your monthly Netflix subscription – but will vary depending on how much you want the policy to pay out, how long you want it to last, and other factors such as your age, medical history and lifestyle, including whether you smoke.

Don’t be tempted to lie about your circumstances to get a cheaper policy – any inaccuracies may invalidate a future claim. And remember that the best (by which we mean the cheapest) time to take out a policy is when you’re young and healthy, so don’t put it off either.

Life insurance is often an affordable way to make sure your family stays afloat financially when you pass away. But its benefit is only truly maximised if it covers everything you want it to. Comparing life insurance on price level alone could mean your loved ones lose out for the sake of a just few pence more in your pocket each month. 

A smarter way to compare life cover is to be clear in your mind exactly what type of policy you’re after, how long you need it for and how much you want it to pay out. Once you’ve found several that meet your criteria, however, choosing the cheapest life insurance from the selection can make perfect sense. Always make sure you can afford the monthly premiums before you commit.

The most common policies are known as term life insurance. These cover you for a fixed amount of time and usually fall into two categories – decreasing term life insurance and level term life insurance.

Let’s start with decreasing term, which lets you choose how long you want the policy to run for. You’ll pay a monthly premium until that date, after which the policy ends and you’ll no longer be covered. The amount paid out decreases over time (hence the name), but you usually use this type of insurance to cover a mortgage, which also goes down with time too.

A level term policy, meanwhile, promises a lump sum for loved ones that always stays the same, whether you die in the first year of the policy, or the penultimate one. As a result it’s usually a bit more expensive than decreasing term insurance.

While the policies described above will cover you for a fixed amount of time, whole of life insurance has no ‘expiry date’. Your partner or children will receive a pay out whenever you die, and consequently this cover is a costlier option. It is often used to ensure a funeral can be paid for, or as part of inheritance tax planning.

Life insurance can cover your remaining mortgage, the rent, monthly bills, or loans and credit cards so there’s no immediate financial pressure on your loved ones if you die.

But it can also cover things like school and higher education, or childcare if your death necessitates this additional cost.

Sometimes the lump sum can be used as a gift, or simply to cover the cost of your funeral so it doesn’t come out of the family savings.

Term life insurance only offers cover for a limited period of time. After your policy expires, you can’t claim any pay-out and the premiums you’ve put in won’t be returned.

An exception is return-of-premium life insurance, which will essentially refund what you’ve paid – but at the cost of much higher premiums while the policy lasts. What’s more, you usually have to hold the policy for the entire term and make all payments to get your money back.

Most people simply accept that life cover, like other types of insurance, is about weighing up the risks of not having it against the price you pay if you don’t need to claim. The peace of mind of knowing your family will be looked after if the worst happens often makes the decision easier.

When you near the end of a life insurance policy, it’s worth considering whether you still need cover. If your mortgage is paid off and your children have flown the nest, then you may not require it anymore. If you do want to continue, you could buy another policy or apply to extend your current one. But bear in mind your premiums are likely to be higher than they were for your original policy now that you’re older, and you may not meet all eligibility criteria.

Generally speaking, you’ll pay less for life cover the younger and healthier you are so, if you think you need it, it’s sensible to compare life insurance quotes as early as possible.

There are several events in life that inevitably make the question of whether to get life insurance more urgent. Buying a new home and taking out a mortgage is an obvious one. If you die before the loan is repaid, the responsibility for it will fall on your loved ones instead, so you need to think about whether they’ll be able to shoulder this without your income.

For other people, having a baby is their trigger to consider life cover. According to Child Poverty Action Group raising a child to the age of 18 in the UK in 2021 stood at £160,692 for a couple and £193,801 for a lone parent. Having a life policy in place, at least until children reach financial independence or have finished school, can give you peace of mind they’ll be provided for when you’re gone.

Even if you don’t have children, getting married or making any other long-term commitment to a partner can also be a reason to research life insurance. Whether you opt for a single or joint life insurance policy, your partner will be financially cared for on your death.

Life insurance is also relevant if you’re planning for a funeral and/or inheritance. According to the SunLife Cost of Dying Report 2022, the cost of a basic funeral in the UK was £4,056 in 2021. The lump sum your loved ones receive can be used to cover this, rather than it coming out of their own pockets. Alternatively the pay-out can make a difference for anyone looking to leave money to their children without inheritance costs. You can take out a whole-of-life insurance policy, which lasts until your death, to cover the inheritance tax bill you expect your heirs to have to pay.

Life insurance provide peace of mind that your partner or children with be financially looked after when you’re not around to do it yourself. If your dependants are still in school (or younger), or if your partner relies on your income it’s especially worth looking into. Ditto if your family is living in rented accommodation or in a house with a mortgage that you pay. If there’s any doubt they could keep up repayments without your salary, life insurance could be a solution.

Even if the long-term financial future of your family looks relatively stable without you, life insurance can be helpful to cover funeral expenses, provide an inheritance, or cover extra childcare costs if you’re not around.

Not everyone needs life cover. Some already have a policy through their employer, others may feel their partner earns enough for the family to live on. If you’re older and your children have flown the nest, it might also be unnecessary. The key question to ask yourself is whether your death would have a financial impact on the people you care about.