Life insurance is a “risk management” tool used to protect the family of a policyholder from financial crisis, in the event of the policyholder’s death. A policyholder receives the guarantee of financial benefit in return for the premium that s/he has to pay on an annual or monthly basis. Life insurance insures a policyholder for a specific period, upon the expiry of which the person is not entitled to any cash refund or benefit. From the two types of policies available in this category, one needs to compare life insurance policies and select the one that meets the needs. Another policy that is quite similar to life insurance is life assurance. One needs to compare life assurance with life insurance to identify the one that best suits his/her requirement.
Compare Life Insurance with Life Assurance
There is a very fine line of difference between the two insurance policies. Thus, it is critical to know the basic characteristics of both in order to compare life insurance with life assurance. Life assurance is an “insurance” policy in which policyholders are guaranteed a payment benefit at the end of its term. This prime difference between the two policies is due to the fact that there is a cash element present in life assurance. Insurance companies have the freedom to invest this amount and add a part of the proceeds to the value of the policy. One can also compare life assurance with insurance by considering the following features:
Benefit amount in case of death: The beneficiary of a life assurance policy would receive the insured sum, along with the investment bonuses that has accrued over time, in case of the policyholder’s death. A life insurance beneficiary would receive only the insured amount.
Benefit amount in case of policy cancellation: If a life assurance policy is canceled prior to the end of its term or death of the insured, the insured can receive an encashment value, which includes an investment bonus. This is not the case with life insurance, where one does not receive any benefit.
It is becoming difficult to compare life insurance with life assurance. The distinctions between these two policies are becoming blurred with insurance companies introducing modifications in life insurance policies to include a cash element.