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The first thing you should know about life assurance is that it has very little to do with death. It has become a vital instrument for wealth management. Favourable tax treatment and portability make a life assurance  contract a vehicle of choice for wealthy clients, and an invaluable tool for inheritance and succession planning as well as asset management, tax optimisation and more.

When it comes to High Net Worth asset management, 65% of wealthy clients own a life assurance contract and it’s the leading asset held abroad for over a third of them. There’s also a big role for life assurance to play in helping this type of client prepare for the future: while almost half (45%) recognise the need for a wealth transfer strategy (mainly for tax optimisation) and 25% have made a will, only a minority (30%) have a proper plan in place.

​Life assurance or life insurance?

The second thing you should know is the difference between life assurance and life insurance. Although the terms are used interchangeably in many parts of the world, properly and technically speaking they don’t actually mean the same thing. Life insurance, like other forms of widely available insurance, only has a value in the event of a claim. Life assurance, however, mixes investment and insurance: it pays out either a guaranteed minimum or its investment valuation, including the accumulated value of annual bonuses paid by the life assurance company, at the time it is redeemed. These contracts are designed to produce long-term, tax-efficient capital growth.

Definitions and terminology.

Life assurance : An agreement between a life assurance company and a policyholder; in return for a payment (premium) from the policyholder, the company commits to pay someone or something (the beneficiary) upon the death of the person whose life is being covered (the life assured).

Life insurance : An agreement between a life insurance company and a policyholder; in return for regular payments, the company commits – for a specific period of time (the ‘term’) – to provide insurance cover to the policyholder, paying a given sum in the event of their death. At the end of the term, the policy ends, and has no residual value.