What are the main differences between Life Insurance and Life Assurance?

The main difference between Life Insurance and Life Assurance is that Life Assurance has an investment value whereas Life Insurance has no investment value.

Life Insurance insures your life - so if you die during the term of the policy, then a claim can be made. If you survive to the end of the term then the policy ends and that's that - just like with home or car insurance.

Life Assurance policy is a combination of a guaranteed insured sum and a non-guaranteed investment - the value of the investment is directly proportional to the guaranteed sum on your policy, the length of the policy and the investment performance of the product.

If you were to die in the middle of a Life Assurance policy’s term, the policy would either pay out the guaranteed sum (the same as with Life Insurance) OR the value of the annual investment bonuses that the policy has earned to date, whichever amount is bigger. As the years progress, the Life Assurance policy increases in value in line with the bonuses attached to it - so the payout will be bigger the longer into the policy you die.

However, if you live to the end of the policy, the investment value can go no higher and you will receive all the annual bonuses plus an additional terminal bonus, for living until the end of the policy.

In recent years, the investment returns on Life Assurance policies have not been very good because investment conditions have been poor. Along with the fact that most insurance companies have started charging penalties for cashing in life assurance policies before the end of the term, means that life assurance policies are no longer as popular as they used to be.

Life Insurance is much cheaper than Life Assurance because it does not have the complexity of any investment issues - most people choose life insurance over life assurance, choosing to invest in other ways.