The world of finance is extremely complicated and there are many factors to consider when choosing any financial protection product. When looking for a policy you need to know what you are looking for and what is on offer in order that you get
right cover for your needs.
One thing that many people find confusing is specific use of term “insurance” and use of “assurance”. What are differences between them?
In general, term insurance refers to providing cover for an event that might happen while assurance is provision of cover for an event that is certain to happen.
For purposes of financial provisions, a life insurance policy provides cover for a set period of time. If worst were to happen during that time (and there are no complications), then insurance company will be required to pay out agreed sum to beneficiary. The only time policy has any real monetary value is if there is a claim made for payment as a result of an event triggering that claim, such as death of person covered. If person outlives term of policy, then insurance policy will cease and no payment will be made.
Life assurance is different from insurance, and will always result in a payment. This is achieved by combining an investment element along with and an insured sum. This means that over time value of policy can increase as investment bonuses are added. If a person covered by life assurance were to die, then insured sum would be paid out, alongside investment bonuses which would have accrued over time. If it is necessary to cancel policy prior to end of any designated term period, or death of life being covered, then once an investment bonus has been added, life assurance policy will have an encashment value. It is therefore possible to cash in a policy earlier than its usual termination date, in order to collect on investment portion. It should be noted that many insurance companies place penalties for cashing in policies early.
