What is the Difference between Life Insurance and Life Assurance?
The terms ‘insurance’ and ‘assurance’ are so easily interchangeable that it seems that the correct usage for each term has been slightly blurred.
To clarify any confusion, here are the clear definitions of the two terms:
Insurance – Covers you, your belongings, your home or your car etc. in the event that something might happen.
This could mean anything from a fire, theft, criminal damage or what insurers like to call ‘Acts of God’, such as floods, hurricanes and other natural disasters. The term insurance is sometimes used to describe a scenario where financial losses are assessed after an event and only then is the amount to be paid decided.
In terms of life insurance, the genuine meaning of the word insurance can only be equated to term insurance – the original type of life insurance – and insurance taken out to cover your costs in the event of illness, such as mortgage payment protection, income protection and critical illness protection. This is the case because all of these policies cover non-eventualities; they are taken out just in case.
Assurance – Covers you in the event that something will happen.
There are not very many certainties in life and assurance in its purest form can only really refer to life cover. In the USA, the term assurance has been eradicated to avoid confusion in firms where both are sold.
In terms of life policies in the UK, assurance only refers to policies that will pay out in any eventuality. This could refer to endowment polices that provide a lump sum pay-out at the end of the agreed term, whether death occurs or not.
Whole of life policies are more commonly associated with assurance because they are designed to pay out in the event of death and are to continue until that time.