Life Assurance and Life Insurance: What’s Best for Me?

Written on 9 September 2019

Life Assurance and Life Insurance: What’s Best for Me?

When going through the mortgage process, sometimes you’re offered additional insurance services, but it’s hard to know what’s the right policy for you. This blog will go into further detail on everything you need to know about life assurance and life insurance and ensure you’re aware of all your options.

What Is Life Assurance?

Life assurance is a type of permanent insurance that covers you your entire life, also known as a “whole of life” policy. The cover continues indefinitely and will pay out a lump sum once the policyholder passes away. With a life assurance policy, you’ll have to meet monthly premiums. Your premium will be higher for this type of life cover because it covers you for a longer term and there’s a definite pay out at the end of the policy.

Some life assurance products are linked with investments, so part of your monthly payments will be invested. This means that the pay-out you’ll receive upon death, will depend on how the investment part of your policy has performed.

With some insurers they will require you to make regular payments right up until the end of your life. But others will allow you to stop paying your premiums at a certain age, usually around 85, and you’ll still receive the pay-out upon your death.

Life Assurance vs Life Insurance

Many people assume that life assurance and life insurance are the same thing – and whilst they do have similarities, they’re very different products. They both have advantages and disadvantages depending on the policy holders’ personal needs and circumstances.

A simpler way to put it is that life assurance is there to protect against events that will happen, whereas life insurance generally covers you in case an event happens. Where life assurance will cover you for your whole life, a standard life insurance policy just covers you for a set term.

The benefit of life assurance is:

  • You’ll have cover for your entire life
  • You won’t need to worry about the beneficiaries not receiving a pay-out

However, because you’re guaranteed a pay out, this means your overall monthly premiums will be more expensive. The premiums are likely to be reviewed every few years, meaning they could also increase over time.

The benefits of life insurance include:

  • Premiums will typically be lower compared to life assurance
  • You can choose how long you want to be covered for
  • In some cases, you can choose whether you want the cover to change over time

Aside from all the benefits, if you were to pass away outside of the life insurance term, you’ll receive no pay out regardless of the fact you’ve being paying premiums for years.  

For both life insurance and life assurance, premiums will depend mostly on age, as well your medical history and current health status. Read more on the Mortgage Protection Insurance we provide here at John Charcol.

Do You Need Life Cover to Get a Mortgage?

While it’s not compulsory to have life cover in place when you get a mortgage, it’s usually advisable. It’s there to protect you and your family, if something were to happen. For example, if you or your partner fell ill, meaning you couldn’t work for a long period of time, any household, childcare or mortgage expenses would be covered for you.

The only insurance that is mandatory for a lenders when arranging a mortgage is buildings insurance. Buildings insurance covers the fabric and permanent fixtures of your home, such as the roof, walls, ceilings, floors, doors and windows.

When dealing with big expenses, such as a mortgage, it’s beneficial to consider the security that comes with the life assurance or life insurance cover.

What’s Right for Me?

At John Charcol, our expert team are here to guide you through the entire purchase process. During the process our advisers will discuss the benefits of life insurance. We recommend that all clients who take on a mortgage consider the benefits of having protection in place, but we will always advise you on the best option for you.

If you’d like to know more about insurance or assurance policies and what might be right for you, please don’t hesitate to enquire now  or speak to an expert on: 0330 433 2927

Categories: General, Insurance