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Life assurance guide 2024 – Life assurance vs Life insurance

A life assurance policy pays out a lump sum (usually tax free) ‘WHEN’ you die to protect your family against financial loss or hardship. The big difference here is that life assurance pays out ‘when’ you die and life insurance pays out ‘if’ you die.

There are lots of different ways to approach this and some people still use the term life assurance instead of life insurance, but still want the same thing. Effectively, life assurance can either be a ‘whole of life insurance’ policy, or it might just be that you actually want life insurance.

In this guide, our life insurance experts will explain what life assurance is and the key differences between life insurance and life assurance. You can then decide whether you actually want a standard life insurance policy, or you are in fact looking for life assurance.

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60-Second Summary – Life assurance vs life insurance

The older generation (including myself) are probably more likely to use the term life assurance than the younger generation. Typically, life assurance was used more commonly before the 90’s, when it was changed to life insurance on adverts and literature.

Life insurance has always been the most common of the two different policies, purely because it’s far cheaper and more flexible.

  • Life assurance is also now known as whole of life insurance and is designed to pay out a guaranteed lump sum to your family ‘when’ you die.
  • Previously, life assurance policies were linked to investments such as bonds or unit-linked and would pay out an amount depending on the performance of your investment portfolio.
  • Life insurance (or term life insurance) is usually far cheaper than life assurance because it only pays out if you die within the term of the policy.
  • Modern life assurance policies are known as whole of life insurance and will pay out a guaranteed lump sum when you die, as long as you continue to pay your premiums.

The key to what life assurance meaning is the word ‘assurance’ instead of ‘insurance’ which are two very different things.

‘Life Assurance’ meaning – is defined as a contract between an insurer (insurance provider) and a policyholder (life insured), promising to pay out a guaranteed lump sum on the death of the person insured under the plan or policy. ‘Assurance’ is defined as an event that will happen as opposed to ‘Insurance’ which is an event which might happen.

Another potential type of life assurance is an ‘Over 50’s Life Insurance’ policy, because it is also guaranteed to pay out on death.

Note: Many people confuse the term life assurance with life insurance, assuming that they are effectively the same thing, which isn’t the case.

The two insurance products or policies are more or less the same, apart from one pays out ‘if’ you die within the term of the cover (life insurance) and the other pays out when you die as long as you continue to pay your premiums (life assurance).

The biggest difference between life assurance and life insurance

  • ‘WHEN’ life assurance pays out a lump sum (usually tax free) to your loved ones ‘when’ you die and is guaranteed to pay out, as long as you continue to pay your premiums.
  • ‘IF’ life insurance is by far the most common type of cover and it pays out a lump sum (usually tax free) to your loved one ‘if’ you die within the term of the policy, and is usually significantly cheaper.

In this interview on ITV‘s This Morning, financial journalist Martin Lewis explains some of the different types of standard life insurance that are available, including level term life insurance and decreasing term life insurance. Martin Lewis is often asked about his opinions on products like life insurance, which we cover in more detail in our full Martin Lewis Life Insurance Guide.

We’d all love a policy to protect our family that is guaranteed to pay them something when we die, but this isn’t always affordable or suitable. Even though life assurance and life insurance are effectively the same thing, there are some significant differences, including the cost.

 Life Assurance or Whole of Life InsuranceLife Insurance or Term Life Insurance
Pays out on death (no exclusions)YESYES
Pays out cash lump sum (usually tax free)YESYES  
Guaranteed to pay out to your familyYESNO (only during term of policy)
Premiums are payable for a term (years)NO (whole of life)YES (up to age 90)
Policy is medically underwrittenYES (unless Over 50s life insurance)YES
PremiumsHigher due to guaranteed pay outLower as it pays out during the term of the cover

Life assurance (or Whole of Life insurance) premiums will always be higher than term life insurance because it is guaranteed to pay out, even if you live to over 100 years old. Most life assurance policies are used to pay for very specific things to help your family financially after you die, such as:

Below, are several examples of the cost of the average life assurance policy compared to a life insurance policy for a longer term. Many people who think that they want life assurance are put off by the cost, and often we see them taking out a life insurance policy for a longer term (e.g. to age 90).

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Below are some examples of the cost of life assurance (or whole of life insurance) compared to life insurance. As we explained above, many people looking for life assurance realise that the cost of this type of cover is usually too high and unaffordable. Many consumers opt for a longer term life insurance policy to age 80 or even age 90 to reduce the cost.

Age at the end of the life insurance term  Life insurance and life assurance premiums
Life Assurance or Whole of Life£110.13

*premiums suggested in the table above for £100,000 of life insurance for a person age 50 (51 next birthday) who is a non-smoker with no health issues.

Note: Don’t be put off taking out life insurance to protect your family because it still provides valuable financial protection for your loved ones. Many people think that they want life assurance but in reality a life insurance policy is perfectly sufficient.

Life assurance is a very specific type of life insurance policy and therefore it might not be right for everyone or everything. Life insurance (term life insurance) is far more flexible and affordable, which makes it more suited to more people’s circumstances.

Most people think that that want life assurance, but when it comes to the crunch they actually want life insurance. The two are very close in terms of what they do, but the cost of these policies are very different.

Generally, life assurance is worth it if you are looking for a specific policy that pays out a guaranteed lump sum on death. These policies are in fact quite niche and would only really suit certain people and budgets.

You might also think that life assurance is too expensive, but if you actually calculate how much you would pay in premiums against what it pays out, then you can see how cost-effective they can be.

There are no rules that you need life assurance and it’s not a requirement to protect an investment for example. Some people might want to consider life assurance if they’ve got something that they want to protect financially, such as:

You can take out life assurance for any reason as it isn’t usually linked to a specific event or debt. It really does depend on your financial circumstances and whether you feel that life assurance is right for you or not.

Note: People often take out life assurance to provide a legacy or financial protection to their families inheritance.

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Life assurance in the UK does not have any cash in value and unlike some other countries, you can’t sell life assurance policies. Some other countries will allow you to sell on your life assurance policy to another person or party, such as certain areas of America.

Generally as a rule of thumb, if you stop paying your life assurance premiums then your cover will stop and you will lose any money that you have paid. You won’t be charged for cancellation and you can cancel your policy or stop paying your premiums at any time.

Top tips for life assurance:

  • Don’t take it if you don’t think you can afford it in later life
  • Always get proper advice from an expert or specialist
  • Make sure that you understand the full T&C’s

Sometimes, you can still get life assurance policies that are either linked to an investment or that have an investment value. These policies were more common before the 90’s when the newer version of life assurance was launched, now known as whole of life insurance.

You must get advice from a financial adviser if you’re looking for an investment linked life assurance policy. As with any other investment, there are risks that the value pf your fund can go down as well as up.

Most of the top life insurance providers or companies in the UK offers life assurance or whole of life insurance. There are some who are clearly cheaper than others in this area and ultimately there is actually very little difference between the different policies, apart from price!

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Vitality Trustpilot score: 4.2 out of 5.0 Stars
Defaqto rating: 5 Stars

Vitality offers the widest range and most flexible life assurance policies for families in the UK, including Vitality Optimiser with rewards. You can often save £100’s on your monthly life assurance premiums with a Vitality Whole of Life Optimiser policy.

Vitality is currently rated 4.2 out of 5.0 stars on Trustpilot as of 05/03/2024, with 37,317 independent reviews. Vitality also partners with various top high street brands to provide appealing extra benefits for their Vitality Life and Vitality Health members.

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Legal & General

Legal & General Trustpilot score: 3.8 out of 5.0 Stars
Defaqto rating: 5 Stars

Legal & General is one of the UK’s most well-known life insurance and general insurance brands. It’s life assurance products are often one of the best value ‘standard’ whole of life insurance policies on the market for consumers.

Legal & General is currently rated 3.8 out of 5.0 stars on Trustpilot as of 05/03/2024, with 13,331 independent reviews.

Aviva logo


Aviva Trustpilot score: 4.0 out of 5.0 Stars
Defaqto rating: 5 Stars

You might not consider Aviva when you’re thinking about life assurance because most people automatically think about car insurance or house insurance. Aviva life insurance is one of the top 3 life assurance providers in the UK and it offers a wide range of affordable options for families.

Aviva is currently rated 4.0 out of 5.0 stars on Trustpilot as of 05/03/2024, with 32,830 independent reviews.

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Zurich Trustpilot score: 4.0 out of 5.0 Stars
Defaqto rating: 5 Stars

Zurich is one of the more traditional life insurance brands in the UK and widely regarded as one of the oldest providers. They offer a range of life assurance policies for consumers and they’re generally very competitively priced.

Zurich Insurance UK is currently rated 4.0 out of 5.0 stars on Trustpilot as of 05/03/2024, with 2,486 independent reviews.

Royal London logo

Royal London

Royal London Trustpilot score: 4.1 out of 5.0 Stars
Defaqto rating: 5 Stars

You might be familiar with the Royal London brand from its investments and pensions area of the business. Royal London life assurance policies are also competitively priced for some individuals and can offer affordable cover for families.

Royal London Mutual Insurance Society Limited  is currently rated 4.1 out of 5.0 stars on Trustpilot as of 05/03/2024, with 1,818 independent reviews.

Life Insurance provider reviews

Life assurance is generally only offered through life insurance specialists or advisers who offer this type of cover. You should get proper advice from an expert with access to a wide range of insurance providers to get the best quotes for you.

If you need help or advice to find the right life assurance policy to protect your family then you can contact our friendly team of experts on 0800 009 6559 or CLICK HERE.

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Is it worth paying for life insurance?

Yes, if you’ve got children or financial dependents then you should have life insurance to protect them if you die. Martin Lewis and the Financial Conduct Authority recommend that you take out life insurance to protect your family and your home. Generally, life insurance premiums start from as little as £5 per month and will be cheaper for younger adults.

Common myths about life insurance:

  • Life insurance won’t pay out (pays out 98% of claims)
  • People with medical conditions can’t have life insurance
  • Life insurance is expensive
  • Savings can be just as effective as life insurance
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Is life insurance worth it? - iam|INSURED

What is the average cost of life insurance per month?

Based on recent research carried out, the average cost of life insurance is approximately £38 per month and the average level of cover is £152,000. Life insurance premiums also vary dramatically from one insurance provider to another and you can reduce your monthly premiums by shopping around.

Fundamentally, life insurance premiums vary depending on your age, health and the amount of cover that you need, starting from as little as £5 per month. You can also get life insurance to protect your family and your home against financial loss if you die.

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Average cost of life insurance - iam|INSURED

What does life insurance cover you for?

Life insurance is a monthly renewable ‘term insurance’ contract that pays out a cash lump sum or regular payments on death to your family or beneficiaries. Policies are most commonly used for family protection or mortgage protection for your loved ones if you die and your household income reduces, plus the additional issues of losing a parent or carer.

Traditional life insurance will not exclude any pre-existing medical conditions and will cover suicide after 12 or 24 months. You can also use life insurance for business protection purposes as well as tax-efficient business life insurance for directors or key people.

What are the disadvantages of life insurance?

The biggest and most common problem that consumers have with life insurance is the cost and the monthly premiums. This is the top reason for policy cancellations and why more people don’t take out life insurance to protect their family.

Another key disadvantage with life insurance is that it holds no investment value, nor can you cash it in. Life insurance works like any other traditional general insurance policy (e.g. car insurance, house insurance, pet insurance etc.), you pay a monthly premium and it will pay out in the event of a claim. Some people decide to use savings instead of taking out life insurance but you need to make sure that you have sufficient savings to cover the costs of death for your family.

Why do I need life insurance?

The fact is that nobody actually ‘needs’ life insurance, but it is strongly recommended that families and couples have cover to protect their loved ones in the event of death. Martin Lewis recommends life insurance and says “this is something that every parent, partner, or person with any other type of dependent needs to consider”.

Life insurance financially protects your loved ones if you die and pays out a cash lump sum to repay your mortgage, pay for school fees, replace lost income, and pay for regular outgoings. Mortgage life insurance is not linked to your mortgage debt so you can use it to pay off some or all of your mortgage.

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