Is It Life Insurance or Life Assurance And How Does It Work Anyway?

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We have all heard of and tend to say Life Insurance but the word is actually Assurance. The difference between ‘Insurance’ and ‘Assurance’ is that ‘Assurance’ is the term used to cover things that will definitely happen – a known event. The term ‘Insurance’ covers things that might only happen – an unknown event. We must all have our cars insured but we may never to have an accident. We may never have them stolen or damaged so we may never claim. But one thing is certain, we are all certainly going to die. Death is a known event and will happen to us all!

What is Life Insurance?

A Life Insurance policy provides a cash sum pay-out when you die or an income to your dependents. You decide how much cover you need and how long you need it for. The companies use their own experts, known as Actuaries, who consider your personal situation including factors such as which sex you are, how old you are, what your general state of health is, how long you want the cover for and how much the policy sum is. They have tables, Life Insurance Rates, built up over many years giving statistics that they rely upon to calculate your premium – your cost for the cover. Providing you are a normal person living a normal life they will take an average and charge you accordingly. But if, for example, you are someone who smokes heavily, is employed in a dangerous job or has a family history of early death, then they will make a risk assessment and apply a loading so when you receive your life insurance quotes you will find them more expensive.

How does Life Insurance work?

Life Insurance can be split into two categories – ‘Term Life Insurance’ and ‘Whole of Life Insurance’. It can also be split into providing a ‘Lump Sum’ pay-out or an ‘Income’ pay-out.

Term Life Insurance Quotes provide the cost of life cover for a determined period. You choose the term and the amount – for example $250,000 of cover for 20 years. If you die within the 20 years the company pays-out the full $250,000. If you survive the 20 year term then the policy matures and it then dies – you will not be allowed to extend it. If you wished to, you would have to take out a new policy. As you will then be 20 years older you will find that this will be much more expensive.

Whole of Life Insurance Quotes provide the cost of cover until you die. By its nature it will be more expensive. Insurance rates are reviewed throughout the policy life against the level of cover provided and are subject to being increased. Some policies work by using part of your premiums to build up capital and then drawing down on that capital to offset the premium increase so making the cost as low as possible.

Policies normally provide a ‘lump sum’ pay-out but others are designed to provide an ‘income’ to your beneficiaries. Depending upon your personal circumstances both has advantages and we can discuss these further at a later date.

Whatever we call it, Life Assurance or Life Insurance, it is something we must all take very seriously.

Purposes Of Buying Life Insurance And Possible Products

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Mainly life insurance Coverage is bought to safeguard the family against the bread earner passing away leaving them behind without the regular income. This remains to be the main function of life insurance even though they can be highly sophisticated these days with a few add ons. Furthermore mortgage providers regularly insist on life coverage for the amount of the loan so that the mortgage can be paid in case of death. This is another common reason to buy life insurance today.

These loan providers might sell life insurance or have someone they refer to but those tend to be more expensive. Plus they might expect to get away with selling you a bit more since you might feel grateful to them for providing the loan. For those reasons you should shop a bit through independent advisors or online before making your mind. Life insurance contracts can last as long as life that being a bit picky at the start would help you out over the years.

Most people might just need a simple life policy with no frills. But they might keep coming across consultants trying to sell them all the fancy staff. This is because brokers make more money when they persuade you to buy an investment element within the life policy. So they might be keener to sell you more than what you need. Therefore, knowing what you want and sticking to it will help you a lot.

Another important point in life to look for life insurance cover is when couples start a family. The responsibilities of bringing a child to this world are high and every parent wants to make sure the child is looked after in case of their untimely death. Unfortunately being young is no protection from death. Therefore it becomes important to arrange a life cover as soon as a child is on the way. Does not much matter that you do not have much money. Basic policies do not cost much and you can pay monthly. Probably it is best to have a joint policy in cases like that to ensure remaining members of the family can cope with the death of one parent. Anyway, it is always possible to add on to the level of coverage or buy another policy.

Some people might want to receive some lump sum in the future if they manage to live long. Some life insurance policies comes with investment element that would pay you a lump sum payment at a set future date if you make it that far or pay the agreed life coverage amount otherwise. These policies could come up in many shapes.

One thing you might like to keep in mind that most of those investment elements have a considerable risk factor like every other investment. Furthermore some companies might have high management charges that you would only be looking after these people calling themselves fund managers. Just take your time and check it properly before committing to a long term contract as you will definitely get less than what you invested if you cash in the contract in under two years.