What’s the difference between life insurance and life assurance?

You may have heard the terms “life insurance” and “life assurance” used and may have wondered whether they can be used interchangeably. But very few of you know the”difference between life insurance and assurance”.

Are these two terms identical? Can one use one and mean the other or not?

These questions arise when you’re contemplating purchasing insurance, and you must know the exact terminology so that there is no confusion at some later stage.

What Is Life Insurance?

A life insurance policy is essentially a contract between you as the purchaser of the policy and the insurance provider. It is an arrangement where the insurance company offers financial protection to the policyholder in exchange for certain fixed monthly payments payable according to a pre-determined schedule.

The contract deems that the insurance company will pay the sum assured to either the policyholder or to nominees that have been named in the policy when certain events occur, such as the death of the policyholder or when the policy matures.

There are several tangible benefits of purchasing a life insurance policy:

• Financial protection for your loved ones in your absence
• Long-term savings for young families to create a corpus for future big-ticket expenses
• Meeting retirement goals in the form of annuities offered by some policies
• Market-linked investment products available
• Tax benefits available for premiums paid
• Achieve short-term financial benefits with money-back policies

What Is Life Assurance?

Life assurance is another way of referring to the “Whole Life Policy.” In this type of policy, the coverage term is indefinite, with no fixed end of term. However, in reality, most insurance providers offer this policy for 99 years. The word “assurance” offers the meaning that the policyholder is assured the sum that has been assured, regardless of the date of death, provided that the premium payment is up to date.

This type of policy also comes with several benefits:

• It is helpful when you have financial dependents for a reasonably long period, such as children with special needs or a heavily dependent spouse.
• It leaves the beneficiaries with a tax-free inheritance apart from other assets.
• This policy is ideal when you want to designate certain assets to one heir and provide financial security for another (dependent) one.
• Useful when you have financial dependents in your old age
• Premiums are fixed for the entire duration of the policy, which helps you plan your expenditure better.
• Premiums and final settlement are both eligible for tax deductions and exemption.

The key difference between the Two

• Though every person’s circumstances, needs, preferences, and budget are different, there are great advantages to having an insurance policy.
• We all have different stages in life and important watersheds that require financial support. Marriage, purchase of property, saving for retirement, children’s education, leisure and entertainment, and more are the events that need to be planned for during a lifetime.
• Life assurance is more useful when you are in inheritance planning. It can meet your family’s needs no matter when your demise happens.
• Life insurance is protected during the term of the policy. If you outlive the policy terms, unless there’s a buy-back clause, you or your heirs get no benefit.
• The premiums for life assurance tend to be higher, but you can increase the cover.
• Keeping these factors in mind, you can choose between either insurance policy.

Difference between Life Insurance vs. Life Assurance

Life Assurance as an investment.

Life assurance policy is a kind of investment; let’s understand it in two ways. Life assurance policy is an investment because after paying a fixed amount, it is expected that you will get its return in the coming time. Generally, the return is given to the insured in two situations, on the death of the insured person or the person gets the survival benefit. It’s the first way to understand why life assurance policy is also known as investment. After investing a fixed period of the amount, you will get protected whole life, and you’ll also get the return of your investment.

Some insurance company provides you with the provision of investment along with life insurance and this investment provision is known as an endowment policy. After joining the endowment policy, the monthly premium amount of your payment is split into two manners. Some percent of your premium amount will invest for a normal life insurance policy and some percent of your premium amount invested by the assurance provider and with this way, it’ll fulfill two different motives.

But when your life assurance becomes cum investment plan, you will be guaranteed a minimum payout in the event of your death, and the entire lump sum amount received will depend on the performance of the investment portion of your policy.

Some Policies

Conclusion

Well, life insurance and life assurance are almost the same things until we talk about the policy tenure and the sum insured. The life insurance policy covers the insured person a fixed period of tenure while life assurance covers the insured person’s whole life.