Life Assurance And Life Insurance- What Is The Difference?
There was a time when I, just like most people did not know the difference between life assurance and life insurance. I thought they were one and the same thing! Since back then I have come to realise that I am not the only one who has mistakenly thought this. Many people find insurance terms confusing and many policies can even seem the same except a few differences in wording. However do not be fooled as this is not the case. There is a difference between life assurance and life insurance and you would be wise to learn the differences before you sign that policy!
The reason you may be confused, is not your fault. There are many people within the insurance industry who do not even know the difference and so there is a lot of contradictory information out there. I will explain in the final paragraph why people get mixed up. But first let me explain the differences between life insurance and life assurance.
Life Insurance
A life insurance policy can be compared to your car insurance policy in that, you pay a premium every month so that you are covered in the event of accident or theft, but if that never occurs you do not get your money back. Well with life insurance, the insurance company only pays out money to your beneficiaries if you die within the period or term you are insured. The term is agreed upon when you take out the policy, and is decided by you. You can decided to take out life insurance anywhere from between 1-40 years. A life insurance policy is in short a financial protection plan, so that in the event of your passing, your loved ones will have a lump sum of money to pay any outstanding debts, such as your bond, as well as money to pay for your funeral arrangements. The amount of money paid out will not have increased in value and will be the same amount of money which you agreed upon when you took out the insurance. There are many types of life insurance but they basically work like this.
Life Assurance
Life Assurance can be thought as a mixture of both insurance and investment. With life assurance, you with decide how much insurance you want to take out and then pay your premiums every month. The amount which you pay is then invested. And every year the insurance company adds a bonus to the guaranteed amount of money you have taken out as insurance. The value of the bonus depends on how well the investment company invests. If you were to die during the term the company pays out. However if you are still alive when the term ends, you also get the cash payout.
The confusion comes because life insurance has whole life cover which a type of life insurance. With whole life insurance, if the policy holder decides to cash in their policy the money will be returned to them in the exact amount.
For more information about life assurance visit the website http://www.hollardlifeinsurance.co.za
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