It is a common misconception that Life Insurance and Life Assurance are the same thing. From the perspective of the insurance industry and a wide spectrum of differing financial institutions in Ireland, these two types of policies are not to be confused. While there are certainly overlaps and close similarities, there remains subtle and slight differences between the two. It is essential to identify these differences, in order to sufficiently select the correct policy for your own financial and personal situation. In this latest blog from FitzGerald Flynn, we will provide a clear definition as to what Life Assurance and Life Insurance mean, with the intention to subsequently identify and clarify the faint yet distinct differences between the two.
Life Assurance, or often referred to as “whole of life” insurance, is relatively easy to define. Unlike insurance, which covers a policyholder financially in the case of an event that may occur, assurance covers the policyholder for an event that is inevitable to happen. As death is one of the few certainties in this life, life assurance is a type of insurance offered by financial institutions to ensure and guarantee that the beneficiaries of the policyholder are financially secure. In most cases, it is typical that a payment, in the form of a lump sum, is made to the beneficiary of the Life Assurance policyholder upon their passing.
One aspect of this type of life policy that may fly under the radar is that life assurance can be an expensive policy. As stated above, this type of policy is intended to cover you until your death, which means that the premiums, which can be costly, will continue to be paid until the day you die. If life assurance is something you can afford, then it is the most comprehensive and sufficient cover that you can receive because it operates on a guarantee - the guarantee that your selected beneficiaries will be sufficiently compensated upon your passing.
However, there are two forms of life assurance in Ireland - reviewable and guaranteed.
Reviewable performs exactly as what you would expect. It is a policy that is reviewed, typically every ten years, and then once a year as soon as you pass a certain threshold, usually 60 years of age.
Guaranteed, however, is set at the beginning of your policy and there is no requirement for review. This means that your premium is guaranteed to remain at the same level and set to reflect a set cost for the duration of the policy.
Life insurance, meanwhile, requires a more detailed explanation. As outlined above, insurance is a typical form of financial protection that covers the policyholder in the event of an unforeseen event, hence why we see insurance protection in the form of car insurance (in the event of a car accident, theft, fire etc.), home insurance and so on. With the application of this logic to a life policy, life insurance therefore covers the policyholder for a fixed period of time, in the event of the death of the policyholder during that defined period of time.
With this in mind, it is difficult to choose the correct life insurance policy, as there are so many options to choose from. Here at FitzGerald Flynn, we specialise in life insurance, so in the following paragraphs, we will aim to identify the most common form of life insurance policies. When it comes to life insurance, there is no one size fits all solution - your life insurance policy will depend on your exact personal circumstances. However , we will aim to shed some light on what you could explore further.
Mortgage protection is the most common form of life insurance and does exactly what it says on the tin - it protects you financially on your mortgage in the event of your death i.e. it will clear you of your remaining mortgage repayments meaning no more monthly instalments paid out to your chosen mortgage financial institution. It is a simple and affordable policy that takes care of a significant living cost.
Term life insurance, in contrast to life assurance, is a type of financial protection that covers you, in the event of your death, for a certain and defined period of time. It is less costly than an assurance policy, but also means that the policy will run out at the agreed upon date. With that in mind, we at FitzGerald Flynn would always recommend adding a conversion option - which basically provides you with the option to extend your policy beyond the fixed period of time. This will ensure that your policy remains the same, despite any changes or variations that may have occurred with your health, in essence guaranteeing your cover should a future health scare arise.
In contrast to term life and mortgage protection insurance, which ensure your beneficiaries financial security upon your passing, income protection and specified illness cover you in case of an unforeseen event which affects your standard of living i.e. your life.
Income protection is a life insurance policy that covers you should you be unable to work due to a disability, injury or illness. It allows you to earn a sufficient income if you are unable to perform your previous duties in the line of work.
Critical Illness Cover, often referred to as specified illness or serious illness cover, pays out in the form of a lump sum should you contract a defined illness that you have outlined in your policy.
Pension term insurance is a form of life insurance that covers you, should you die prior to your retirement age. If you are to pass during this defined period, your beneficiaries will receive a financial benefit so they do not suffer as a result of your passing. This product is also tax efficient.
As you can see from the above, life assurance and life insurance can be quite a nuanced discussion - there is no solution that will cover every situation and as mentioned above, every person will have circumstances that fit to a different policy. We have outlined just a few different options that are available to you, but every option requires a detailed discussion in order to define the best course of action.
With that in mind, we would highly recommend talking to a financial advisor today. We at FitzGerald Flynn have a number of qualified professionals on hand to talk you through your options, as life assurance/insurance is one of the most important insurance decisions you can make, to ensure that your loved ones are sufficiently looked after.
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