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Life Insurance or Life Assurance

The variety of life insurance (or assurance) policies available should be sufficient to cover most needs, but the terminology in the titles would perhaps benefit from some clarification.

'Life insurance' and 'life assurance' tend to be terms which are used quite commonly for similar types of cover regardless of purpose, so a brief explanation may help to prevent confusion. 'Insurance' is a gamble of sorts, in which the provider agrees to hand over an agreed sum of money if a certain event takes place i.e. a car accident or damage to your home. If the event does not occur then no payment is made but the premiums remain with the risk taker, in other words the insurance company. 'Assurance' on the other hand is the correct name to use for whole life policies, where the only gamble is when the policy will pay out as it assuredly will. Term life insurance does not carry the same degree of cover in that it is valid only for a specific period of time.

Since no one has yet discovered the key to eternal life (at least outside religious terms) then a payout for a whole of life policy is sure to happen sooner or later. In the case of home or car policies the insurance is for the benefit of the policy holder who, by having a valid claim, has 'won' on the gamble in that the payout provides recompense for loss of assets which have a value. A life insurance policy on the other hand can never (normally) be for the benefit of the policy holder, as that person's death is a necessary factor to trigger a payout. There are however exceptions where the policy is specifically formulated to provide payment at an agreed time.

Hopefully the above will have provided some illumination on the subject of insurance and assurance; however, both terms are commonly used by insurance providers in respect of life insurance policies and by this usage they have (albeit incorrectly) become interchangeable.