Is life insurance the same as life assurance?

Before we look at the key areas of Whole of Life Assurance, it’s worth clarifying the difference between an ‘insurance’ and a ‘assurance’ policy.

‘Insurance’ is where you insure yourself in the event of your death, for example with life insurance, and so if you die during a particular term/whilst the insurance is in place, the insurance company pay-out.

‘Assurance’ is where you are cover yourself for an inevitable, once again for example, in the event of your death, and so this policy will pay-out when that happens.

Another way to look at it, you ‘insure’ your car in the event of it being damaged or stolen. But you would ‘assure’ someone that you are or are not going to do something, in other words, it will happen regardless.

What is whole life assurance and how does it work?

As we have already alluded to, this type of policy will pay out when you die. There is no time-period (term) i.e., condition that you must die during this period to receive a pay-out, instead, it will pay-out when the inevitable happens.

This means that, this policy is actually very different to Life Insurance, because it is used to assure a certain pay-out in the future, of which there are several key reasons for this, explore below.

It also poses a very different underwriting and pricing approach from the providers offering these policies, as they need to make sure they quantify the risk they are taking and price accordingly.

What is whole life used for?

As mentioned, there are a few key areas in which these types of policies are specifically designed for:

1. Inheritance tax planning – If you have identified an inheritance tax liability and you don’t want your beneficiaries of your estate to inherit this, then you might consider a Whole of Life policy to cover sum/or of this liability.
2. Funeral costs – According to the Co-Operative Funeral Care, the average cost of a funeral in 2020 was £3,740. Many people don’t want their beneficiaries to incur the cost and hassle of having to fund this so look at a policy to cover this.
3. Leaving your family something – Some people simply take these policies out to leave their family a lump sum on their death.

If you have any more questions regarding Family Income Benefit, just give us a call on 0117 251 0083, or email us at enquiries@integraf.co.uk

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PLEASE NOTE: IF THE POLICY HAS NO INVESTMENT ELEMENT THEN IT WILL HAVE NO CASH IN VALUE AT ANY TIME AND WILL CEASE AT THE END OF THE TERM. IF PREMIUMS ARE NOT MAINTAINED, THEN COVER WILL LAPSE.