Life insurance, also referred to as life assurance, is one of the most common types of insurance in the world. However, while the terms insurance and assurance are often used interchangeably, there is a specific meaning to each of these terms. In general, insurance refers to coverage for an event that might not happen, while assurance is the provision of cover for an event that is certain to happen.
Because of this, the terms assurance is often used within the life insurance industry, especially in the United States. Life insurance is basically a contract that exists between an insurer and and insured person, whereby the insurer agrees to make a payment to a designated beneficiary at the time of the death of the insured party. Most life insurance policies can be distinguished by whether they are term life assurance (Aspect Online) or permanent life assurance.
Term life assurance refers to a range of life assurance policies that are designed to provide coverage for a specified period of time. These kinds of policies do not accumulate a cash value, and are used simply as a way to provide financial protection in the case of the death of the insured person. The three key factors to consider in a term insurance contract are the face amount of the death benefit, the ongoing premium that is going to be paid, and the length of coverage which is also known as the term. However, it is easiest to understand the defining characteristics of term life assurance when it is compared with the other major category of life insurance, permanent life insurance.
Permanent life insurance is very different to term life insurance, because it remains in-force until it either matures or lapses. Permanent life insurance is also taken out for very different reasons than term life insurance, as it is able to build a cash value over time. The two main types of permanent life insurance on the market are whole life coverage and universal life coverage. There are also a number of different types of term life assurance on the market, including level term policies, annual renewable term policies, and mortgage insurance. One of the defining characteristics of term contracts is their length of coverage, and different forms of term life assurance differ mostly with regard to how assets are managed and coverage is given within specific periods of a policy term.