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06-01-2011, 01:48 AM #1
Difference Between Life Insurance and Life AssuranceMost people do not understand the important difference between Life Assurance and Life Insurance but itís quite simple.
Life Insurance insures you for a specific period of time. Then if you die whilst the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term, the policy is finished and has no residual value whatsoever. Even whilst the Life Insurance policy is in force it only has any value if you have a claim Ė in that context itís just like your home insurance!
Life Assurance is different. With Life Assurance you have an important investment element. A Life Assurance policy joins a guaranteed insured sum with a none guaranteed investment, the value of the investment being directly related to the size of the guaranteed sum on your policy, the number of years the policy has been in force and Insurance Companyís investment performance.
If you were to die during a Life Assurance policyís term, the policy pays out the guaranteed sum (just as with Life Insurance) or the value of the annual investment bonuses that had been added to the policy by the Insurance Company to date, whichever is the larger. Therefore, as the years go by the Life Assurance policy increases in value as the bonuses attached to it, build up.
However, if you survive to the end of the policy, your investment value is increased. You then get the annual bonuses plus a terminal bonus.
When a Life Assurance policy has earned an investment value via its annual bonuses, you can cash it in with the insurance company. However, most people get a far higher price for their policy by selling it to a specialist investment broker. Youíll find a number of investment brokers on the Internet who wish to buy life assurance policies.
In recent years, the investment returns on Life Assurance policies have dropped very significantly reflecting investment conditions. Furthermore, most insurance companies have placed penalties for cashing in policies early. This has similarly reduced the resale value for Life Assurance policies.
Life Insurance is much cheaper than Life Assurance and, in our experience, Life Insurance is what most people need....being a human...