Life Insurance Vs Life Assurance
Since the term "Life Assurance" has been coined, I have
always assumed that both Life Insurance and Life Assurance are
names for the same form of insurance. But if you belong to my
category don't be heart broken because various financial wiz
kids have got it wrong too. Life Insurance and Life Assurance
perform two different financial roles and are east to west when
it comes to costs.
But before we go in the nuances of what are the main
differences between the above two forms i.e. Insurance and
Assurance. Let's just find out why one needs to get
"assured"?
In our youth, planning for our future can be a tedious job plus
a time consuming burden. Considering from where one would get
the time to shop for such products when one is trying to keep up
with the nitty-gritty of work and home life. But even if all
things in life were predictable, death for sure cannot be
predicted. But if the unthinkable would happen, do you see your
spouse and dependants financially secure and healthy for the
rest of their life? If not, then a life assurance policy is a
must.
Life Insurance has been defined by dictionary.com as an
'Insurance that guarantees a specific sum of money to a
designated beneficiary upon the death of the insured or to the
insured if he or she lives beyond a certain age.'
But Life Assurance on the other hand is different. Life
Assurance is a hybrid combination of insurance and investment. A
'Life Assurance policy' pays out a sum of money equal to
the higher of either a minimum underwritten by the policy's
insurance clause or its investment valuation. Thus, making the
value of your investment reliant on the insurance company's
performance with respect to investment and growth.
Each year the insurance company adds an annual bonus to
the guaranteed value of your assurance policy and there is a
terminal bonus at the end of your term. Therefore, as years go
by your assurance policy increases in value as investment
bonuses keep adding on. But unlike life insurance if you were to
die during the life assurance's term, the insurance company
would pay out the higher of either the guaranteed minimum sum or
the accumulated value of the annual investment bonuses.