Life assurance vs life insurance: what's the difference?

Usually, yes. The terms 'life insurance' and 'life assurance' are normally interchangeable. HMRC mostly uses 'life insurance' in its guidance and keeps 'life assurance' for a specific tax definition.

Some providers do tell them apart. Post Office and Vitality use 'life assurance' for cover that lasts your whole life, and 'life insurance' for cover over a set period.

Lloyds Bank says life assurance usually covers you for your whole life. The Association of British Insurers (ABI) says whole of life plans are also known as life assurance.

Where the two words are told apart, yes: life assurance means whole of life cover, which covers you for your entire life.

There's no end date, so the policy pays out whenever you pass away, as long as you keep paying the premiums. Vitality says its cover ends only when you pass away or stop paying, which is why the payout is guaranteed.

Whole of life cover is typically more expensive than shorter-term policies. The Financial Conduct Authority (FCA) found underwritten whole of life has the highest premiums of the protection products it studied. The payout is typically higher, and more likely to be paid, because the policy covers you whenever you die.

Things to check on a whole of life policy:

• A standard whole of life policy is medically underwritten (the insurer weighs up your health): you answer set questions about your medical history and current health. Guaranteed-acceptance over 50s plans, which the FCA counts as a type of whole of life plan, don't ask people over 50 about their health.
• Premiums are typically paid for life. Some policies set an age when payments stop, and the cover then carries on without further payments.
• Premiums can be reviewed every five or ten years, and they can rise until they're unaffordable. If you live longer than you expected, you could pay in more than the policy pays out.
• Some plans invest your premiums and build up a cash value you may be able to withdraw or borrow against. Others have no cash-in value at any time, such as Legal & General's Whole of Life Protection Plan.
• Vitality lists cases where cover may not pay out, including if you stop paying your premiums or aren't honest on your application.

Over 50s plans are lifelong cover too: the ABI calls them guaranteed whole of life plans. They pay a guaranteed lump sum when you pass away, and the money is often put towards funeral costs. They typically have a waiting period, usually 12 or 24 months, when most insurers refund the premiums paid instead of the full amount.

Whole of life policies are often used for Inheritance Tax planning. ABI figures for 2024, cited by the FCA, show whole of life had the highest claims payout rate of the protection products, close to 100%.

• Whole of life insurance: how cover for life works
• Over 50 life insurance: guaranteed whole of life plans
• Term vs whole of life insurance

Where the two words are told apart, yes: life insurance means term cover. It runs for a fixed period (the term), such as five, ten or 25 years, and pays out a lump sum if you die within it.

If you outlive the term, which might be 20 years, the cover ends and you'd need a new policy to stay covered. Legal & General's term policies have no cash value, and neither L&G nor Aviva pays anything back when the term ends.

Term cover is generally cheaper than whole of life, but it has a fixed end date. There are several kinds:

• Level term keeps your cover the same throughout, with fixed premiums unless the policy is reviewable.
• Decreasing term reduces your cover each year, in step with a repayment mortgage. It usually costs less than level term.
• Increasing term raises your cover and your premiums during the term, to keep up with inflation or a growing debt.
• Family income benefit pays your dependants regular amounts instead of a single lump sum if you die.

You'll also see fixed-term cover called 'term assurance'. HMRC, the ABI and insurers such as Assura Protect use the phrase, and Assura says its Decreasing Term Assurance is also known as mortgage life insurance.

• Term life insurance: cover for a set number of years
• Mortgage life insurance: decreasing cover for a repayment mortgage
• Types of life insurance

They're closely linked. Life assurance at work is group cover that pays a benefit if an employee dies in service, and employee packages often include it as death in service benefit. It's the most common employer-sponsored protection benefit in the UK.

Group Risk Development (GRiD) says it's often the only life insurance that people on low to middle incomes have. Your employer is generally the policyholder, pays the premiums and makes any claim.

The payout is often linked to your salary. Canada Life, for example, offers employers fixed amounts or multiples of salary. It can be a lump sum for the people you nominate, a taxable pension for your dependants (less common nowadays), or both.

Most schemes run within HMRC's rules for registered occupational pension schemes. Lump sums can normally be paid tax-free up to the Lump Sum and Death Benefit Allowance.

The two words have been mixed for centuries. The Life Assurance Act 1774 describes itself as an Act 'for regulating Insurances upon Lives'. Its short title, 'Life Assurance Act', only came in 1896.

HMRC still uses the 1774 Act to define a policy of life insurance: 'an insurance policy on life'.

In tax law, 'life assurance' has a specific meaning, used in the rules on how insurance companies are taxed. For your family, a life insurance payout isn't taxed, though it may be added to the value of your estate for Inheritance Tax.

A policy written in trust isn't counted as part of your estate, and can be paid outside probate (the legal process of dealing with an estate) and Inheritance Tax. Our guides on whether life insurance is taxable and life insurance in trust explain more.

So a policy called 'assurance' can be term cover, and a company called an 'insurance society' can provide life assurance. The policy summary or key features document tells you how long the cover lasts and when it pays out.

That comes down to how long you need cover for: a set period, your whole life, or both. Who relies on you and what the money is for decide which type of cover fits.

MoneyHelper says life insurance suits you if you have dependants, such as school-age children, or a partner who relies on your income. It also suits you if you want your loved ones to be able to cover your funeral costs. You might decide against it if you're single or your partner earns enough for your family to live on.

If covering everything costs more than you can afford, think about your priorities or a lower level of cover. Some protection might still be better than none.

You don't have to pick one. Post Office says you might not need life assurance if your life insurance covers your needs. If you want lifelong cover with a guaranteed payout, it says you could consider having both.

Before you apply, check what cover you already have through work, what the money would need to pay for, and for how long.

1. Check what you have through work Employee packages often include death in service benefits linked to your salary. That cover stops if you leave the employer.
2. Match the policy to how long the need lasts A need that ends on a known date, such as a repayment mortgage, points to term cover. A payout whenever you die, or money for an Inheritance Tax bill, points to whole of life cover.
3. Work out how much cover The amount depends on your debts, your mortgage or rent, how many dependants you have and your take-home pay. Our life insurance calculator gives a starting figure.
4. Check the policy terms and consider a trust Check whether premiums are fixed or reviewable, and whether writing the policy in trust would help keep the payout outside your estate.
5. Answer health questions carefully and compare quotes Answer the health questions with reasonable care: a wrong or misleading answer is a misrepresentation. Premiums vary, so it's worth comparing quotes. Reassured, the broker we work with, compares quotes from a panel of leading insurers.

• How life insurance works: premiums, payouts and your rights
• Is life insurance worth it?
• Life insurance calculator