What is the difference between Life Insurance and Life Assurance?

The central difference between Life Insurance and Life Assurance is that Life Insurance never has an investment value but Life Assurance does. As a result, Life Assurance is far more expensive.

In our experience, many people ask for Life Assurance when they really mean Life Insurance. It is important to decide which you want!

Life Insurance insures you for a specific period of time - and if you die whilst the policy is in force, the insurance company pays out a lump sum. However, if you survive to the date the policy finishes (the end of its term), the policy is worthless. Life Insurance only ever has a value if there is a claim - in that context it's just like your car insurance!

A Life Assurance policy is different. It combines a guaranteed insured sum with a non-guaranteed investment. The value of the investment content directly related to the size of the guaranteed sum on your policy, the investment performance of the insurance company and the number of years the policy has been in force.

With Life Assurance, if you were to die during the policy's term, the policy would pay out either the guaranteed sum (this is what you would get with Life Insurance) OR the value of the annual investment bonuses that the Insurance Company have added to date, whichever is the larger. As the years go by, the Life Assurance policy increases in value as the cumulative value of the bonuses attached to it build up - so the longer into the policy you die, the larger the pay out could be.

However, if you survive to the end of the policy, the investment value will have reached its peak and you will get this value plus, possibly, a terminal bonus.

When a Life Assurance policy has built up an investment value via its cumulative annual bonuses, you can either sell it to a specialist investment broker or cash it in with the insurance company. You'll find a number of investment brokers on the Internet who will buy life assurance policies and they are often prepared to pay significantly more than the life assurance company.

In recent years, the investment returns on Life Assurance policies have been poor. This, along with the fact that most insurance companies have started charging penalties for early encashment, means that life assurance policies are nothing like as popular as they were. But they do have their uses.

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