The terms life insurance and life assurance are often used interchangeably, but this is technically incorrect—and the distinction is an important one. Your needs will be dependent on your situation; check out our quick guide to the difference between life insurance and life assurance to find out more.
What is life insurance?
Life insurance provides you with cover for a specific period of time. This period is known as the policy’s ‘term’. For example, a 30-year-old with two children may take out a life insurance policy for 25 years, to protect their children in the event of the policy holders’ death. At the end of the 25 year term, the children will be adults and less likely to be financially dependent.
Within this, there are different types of life insurance you can purchase. Level Term insurance provides a level of cover which remains the same over time. Decreasing Time insurance means the level of cover will decrease throughout the term of the policy.
What is whole of life assurance?
Whole of life assurance will last for your entire lifetime. You will pay a monthly premium, and on the event of your death, the policy will pay out a lump sum to your estate which can be used to help your loved ones through the difficult period.
Whole of life assurance is typically more expensive than term insurance as it provides cover for your whole life. This provides your beneficiaries with a tax-free lump sum when you die.
Whole of life assurance can therefore be useful for families with inheritance tax liabilities. Adequate tax planning is important, so it’s crucial you seek professional guidance. Enness can put you in touch with expert tax advisors to discuss this. Tax treatment depends in individual circumstances and may be subject to change in the future.