Finance Talk

last night i had a vigerous discussion in the pub about whether i had life insurance or life assurance. (sad isn't it!) Is life insurance the same as life assurance and if not what is the difference? it's worth a pint!!
Thanks.

Strictly speaking, "life insurance" and "life assurance" are two quite different insurance products - although the man in the street does not generally understand the difference between them and consequently often uses the descriptions incorrectlly.

"Insurance" is where a policyholder is insuring against someting that may ,or may not, happen. For exanple, you have car insurance in case you are involved in an accident - it is not certain that you WILL have and accident. It's the same with life insurance - you are insuring in case you were to die before the policy reaches its termination date. You may survive beyond the policy's termination date or you may die before - and if before, the insurance company will pay out.

"Life assurance" is different. This is a policy where the insurer knows that it will ALWAYS have to pay out. There are a number of different types of life assurance - but let me explain the 2 main types. A Whole of Life assurance policy is where the policy continues until you die, whenever that is, and the insurer makes a payout on your death. A Term Life assurance policy is a policy which has a set termination date and the insurer will payout on death or the policy's termination date, which ever comes soonest.

In order to provide the policy payouts which come with life assurance, part of the premium you pay is invested. Then if there is a payout, the insurer pays either the value of the investment fund your policy has built up, or the guaranteed sum that the insurer agreed when you first took the policy out.

can I now please claim my pint?!