Life Insurance, Life Assurance: Are these the same?

Life insurance can sometimes be confusing – it is peppered with technical jargon that may sound Greek to the uninitiated in the world of insurance. Take, for example, life insurance and life assurance, which is usually taken to mean the same thing. But is there really a difference?

In essence, life insurance will only pay if you die, something that might or might not happen during the life of the policy. When you outlive the coverage period of the policy, you don’t receive anything from the insurance company. However, if you die at the time the policy is effective, the insurance company will pay your beneficiaries the sum insured.

Life Assurance Has an Investment Component

On the other hand, life assurance includes an investment component along with the life coverage. That way, even if you outlive the coverage of the policy, you still stand to receive something based on the investment component of the policy. In some policies, the investment portion is often referred to as the policy’s cash value.

Purpose

The basic purpose of life insurance is to provide for your family in case of your untimely death.

Life assurance goes one step further by adding a savings component. This means that the maturity of the policy can be scheduled to coincide with some major phases of your life, such as your retirement or the time your child is set to go to college. This means that you can use a life assurance policy as your child’s educational fund or your retirement fund. You can also use it to fund a large expense. The advantage is that if you die early, your beneficiaries will receive the full amount, as opposed to a simple savings account, where your loved ones will only receive what you have set aside in your savings account.

Life Assurance as “Forced Savings”

Life assurance may be more expensive than a straight out life insurance policy. But it “forces” you to set aside your money for a specific purpose. The advantage with this forced savings is that there are tax benefits to be enjoyed for the proceeds of the life assurance, something that cannot be said with a simple savings plan.

To protect your loved ones for less, fill the form on the right to get your life insurance quote.