When it comes to effective estate planning, many people do not understand the difference between Life Insurance and Life Assurance. With this in mind, Laura Richardson looks to make the distinction significantly clearer in her latest article . . .

It is important to understand the difference between Life Insurance and Life Assurance and how this will affect any payout that your loved ones would receive should you die.

Life Insurance pays out a lump sum should you die within the term of the policy. It is common for a Life Insurance policy to run alongside a mortgage so that in the event of your death a lump sum is paid out which will enable your chosen beneficiary to pay off the remaining mortgage debt. In fact, some Life Insurance policies can be set up so that the lump sum paid out is the same as the remaining mortgage debt amount. Setting up your Life Insurance policy in this way tends to be more affordable, due to the decreasing amount paid out as the term progresses. However, depending upon your financial position, you may wish to base your level of cover upon how much you can afford to pay towards your Life Insurance policy premium each month. Generally the greater the premium you agree to pay each month, the greater the lump sum amount that would be paid out should you die within the term of the policy.

Life Assurance differs from Life Insurance in that it is guaranteed to pay out a lump sum in the event of your death regardless of how long you have held the policy. For this reason, it is sometimes referred to as ‘whole of life’ cover. Again, a Life Assurance policy can be tailored to suit your individual financial circumstances. There are several types of Life Assurance policies to choose from including options to link your Life Assurance policy to investments which in an ideal world would increase the lump sum paid out when you die. However, as with any investment product, you must take into account the fact that investments can increase and decrease, and as such, there is an element of risk involved in this type of product.

Due to the significant impact that a Life Insurance or Life Assurance policy payout would have on easing the financial impact of your death, it is crucial that you discuss your requirements with a fully independent financial advisor in order to determine which policy type would be right for you. Furthermore, the insurance market is constantly changing, reflecting current financial markets and needs. For these reasons, once you take out a policy, it is advisable to review your policy regularly to ensure that they are the best product available to suit your current requirements.

For all of your financial product needs, we at Andrew Douglas Wills & Legal Services are proud to offer a comprehensive independent financial advice service through our trusted partners. We understand that our clients are worried during these uncertain times and therefore we are committed to offering a fully remote service in order to be able to safely continue advising our clients during the Covid-19 pandemic. Therefore, whether in Essex or anywhere across England and Wales, call today to arrange your free initial consultation.

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