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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 the right cover for your needs.
One thing that many people find confusing is the
specific use of the term “insurance” and the use
of “assurance”. What are the differences between
them?
In general, the term insurance refers to providing
cover for an event that might happen while assurance
is the provision of cover for an event that is certain
to happen.
For the purposes of financial provisions, a life
insurance policy provides cover for a set period of
time. If the worst were to happen during that time
(and there are no complications), then the insurance
company will be required to pay out the agreed sum to
the beneficiary. The only time the 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
the death of the person covered. If the person
outlives the term of the policy, then the 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 the value of
the policy can increase as the investment bonuses are
added. If a person covered by life assurance were to
die, then the insured sum would be paid out, alongside
the investment bonuses which would have accrued over
time. If it is necessary to cancel the policy prior to
the end of any designated term period, or the death of
the life being covered, then once an investment bonus
has been added, the 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 the investment portion. It should
be noted that many insurance companies place penalties
for cashing in policies early.
The distinction between the two terms has become
increasingly blurred. This is principally due to many
companies offering both types of policy and grouping
insurance and assurance titles in similar contexts,
sometimes interchanging the two terms. Richard Brown,
Chief Executive of Moneynet.co.uk, clarified the
situation by stating, “most life insurance companies
offer a wide range of insurance and investment
services – for example pension, investment funds,
investment bonds, car insurance, home & contents
insurance, life assurance, and even loans. Sometimes a
‘life insurance’ company will call itself a
‘life assurance’ company but they mean one and the
same.”
More companies within the financial services industry
have realised that consumers are becoming increasingly
baffled by the choice of financial products available.
Although this confusion has resulted in a certain
amount of apathy, many firms are resolving the
situation by providing comprehensive information
guides. This has lead to an increase in the number of
the online financial guides and glossaries that have
become available. Sites such as http://www.Moneynet/
or http://www.Moneyfacts/, and http://www.MoneyExtra/
not only provide comparisons of financial products,
but also information to help consumers make informed
decisions. With organisations like Which? writing
publications such as ‘Be Your Own Financial
Adviser’, the focus has turned to providing
consumers with sufficient information to make their
own financial judgements.
By www.moneynet.co.uk
Author Info:
E-mail: INFO@MONEYNET.CO.UK Telephone: 020 8313
9030 Fax: 020 8464 1971 Website:
http://www.moneynet.co.uk Address: Moneynet Sussex
House 8-10 Homesdale Road Bromley Kent BR2 9LZ
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