Updated August 2018

Life Assurance / Life Insurance

This is life cover that pays out a sum of money either on the death of the insured person or after a set period.

What Is Life Assurance?

Life Assurance usually has no set policy term and covers you for your entire life. Whole of Life cover is one type of Life Assurance. A claim can be made whenever the policyholder dies at any stage in their life. It tends to be more expensive, as it is provided over a longer term and guarantees a payout at the end of the policy. It can either be set up as a fixed premium with a fixed cover, or it can be investment linked, so part of your premium is invested, with reviewable premiums and cover. If investment linked, the amount of any pay out received on death will depend in part on how the investment part of your policy has performed.

What Is Life Insurance?

Life Insurance is more concerned with making sure you can still provide for your family if you were to die, by giving them the financial support required to ensure they can pay the bills, mortgage or any other responsibilities. As a term cover and there are many different types of terms, the most common being level term, a pay-out can be claimed if the policyholder dies within the set, agreed policy term (usually between 10 and 25 years). However, if no death occurs within the policy period then there will be no pay-out and the policy will expire.

In essence, you assure for something that will happen, but insure for something that may happen.

Arguably the most recognisable Life Insurance policy is level term, taken out to provide money for your family if you or your partner were to die (during the agreed term). The pay-out will be a fixed amount regardless of when you die during the term. The term usually coincides with the end of the mortgage repayment, or when your family is likely to be financially dependent.

Do I need life cover?

To understand whether Life Assurance or Life Insurance better suits your needs, you need to consider what the purpose is. The type of cover that you need, if any, will be based on your particular circumstances, medical history and current health status. If you have no dependants and are single, then you may not need a policy at all. However if you have a mortgage, business or debts, you may wish to consider some form of cover. Similarly, if the financial impact of your death on your family would be minimal, again, you may not need to take out cover. But don’t under estimate what financial impact means. For example, if you are a stay at home parent, the cover could prove valuable, as childcare and housekeeping costs would still need to be paid even if you were no longer around.

Please note that this information is not fully inclusive and is intended to provide general information only. It does not constitute personal advice. We recommend you talk to your Brunsdon Financial Adviser for further information and qualified advice. Any reference to tax treatment or legislation is based on our understanding of current UK legislation (September 2018), tax law and HM Revenue & Customs practice, all of which may be subject to change. The value of investments can go down as well as up and past performance is not necessarily a guide to future performance.

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