Equote- David Livingston

We hear about life assurance as well as life insurance and take one to be the synonym for the other. However, when people take these two phrases to be synonymous, they are neither wrong nor right. These two are as much similar as they are different. For instance, life assurance covers only those incidents in your life that is sure to happen while life insurance covers those incidents that may happen; that is the difference. Now, the similarity is that, both these policies cover death! If you find that to be perplexing, wait until we clarify it further.

As we all know, there are many types of life insurance policies, but they can be categorized into two distinct groups; the temporary life insurance policies, which are valid for maximum 30 years and permanent life insurance policies, which are valid for the life of the insured. Now, the term life insurance belongs to the first category and such policies are sold for 1/5/10/15/20/25/30 years. On the other hand, policies like whole life, universal life or variable universal life are valid for the life of the insured. This takes us to the next step.

Everybody who is born must die and so death is an incident that is sure to happen; but the question is one does not know when that is going to happen. You can die early in life or can live upto be 95. Now, in a term life, there is no assurance that the death of the insured is going to take place within the term; in other words, the insured incident may or may not take place while the policy is in force. Therefore, a term life is a pure life insurance policy.

On the other hand, in the permanent policies, the benefits are payable whenever the insured dies provided the policy has been kept in force by regular payment of premium until then. Therefore, for such a policyholder, death is an assured incident that is going to happen and so such a policy is known as life assurance. However, few of us actually call it by that name, but use the term ‘life insurance’ for both the categories.

However, there is another difference too. The life insurance policies do not provide anything other than death benefit. In fact, no other return can be expected unless the insured dies within the stipulated term. The life assurance policies on the other hand are hybrid policies that offer an investment opportunity along with insurance. Such policies pay death benefit if the insured dies while the policy is in force, but you can also cash out these policies after stipulated years and receive a certain amount developed in a separate account as the cash value of the policy.

Another difference is the price factor. Because the life insurance policies seldom pays the death benefit and offers no other return they are quite affordable and anybody trying to get coverage for his family at an affordable rate should opt for it. The assurance policies on the other hand are more expensive because some return is always assured under these policies. However, the Financial Services Authority views it more as an investment product than as insurance. In fact, people buy the assurance policies more for building up their asset than for providing coverage.

Another difference is that the return promised by the life insurance policies is generally preset, but in case of life assurance policies, it can depend upon the market condition as well as the performance of the funds. Actually, these policies have some features of mutual fund incorporated in them and this is why these policies are as much profitable under good market condition as they are risky if the market takes a downward turn.

In short, the difference between Life Assurance and Life Insurance are as follows:

• The life insurance policy covers an incident that may happen during its tenure and the life assurance policies cover incidents that is sure to happen.
• Consequently, only the term life policies are insurance policies while the rest can be categorized as life assurance policies.
• While the life insurance policies do not provide anything other than death benefit, the life assurance policies are hybrid policies that offer an investment opportunity along with insurance.
• As a result, life insurance policies are reasonably priced while the life assurance policies are quite expensive.
• The insurance policies provide a preset amount as death benefit while the return promised by assurance policies can vary according to market condition.

Article by David Livingston of EQuote, who is a specialist in everything life insurance. For more information on term life insurance cost and low cost life insurance, visit his site today.