Life insurance tips
Life insurance can be used in many different ways: as a pension provision, as financial security for the surviving dependents in the event of death, as a repayment vehicle, or as security for loans. Find out here the advantages and disadvantages of life insurance and what you should pay attention to before and after concluding the contract.
Benefits of life insurance
The premium payments in a life insurance policy are tax-deductible to a limited extent if the payment is intended to be in the form of annuity payments. Due to the 2016 wage tax reform, special expenses can only be taken into account for existing contracts and only for the years 2016 to 2020.
Disadvantages of life insurance
Life insurance has the disadvantage that profit sharing is non-binding. In addition, they only have very little flexibility: if you need capital during the term, you can suffer high losses. The reasons for this are that the premium shares for life insurance and the insurer’s administrative costs are irretrievable. The brokerage commission of the seller also has an impact. There is also a long capital commitment.
When is life insurance necessary?
Pure risk insurance that only covers death makes more sense than mixed endowment and endowment insurance to protect surviving dependents. It can be taken out for a shorter period and a higher sum insured than is possible with life insurance. In this way, it can be adapted to the current life situation (eg until the end of the children’s training periods).
What you should pay attention to before signing a contract
Life insurance requires a long-term financial commitment and a contractual commitment over many years. Before you decide on a product or a provider, you should obtain comprehensive information and clarify various questions for yourself. Here is a small checklist:
What type of insurance do I actually take out?
What many people often do not realize is that not all life insurance is the same. So take a close look at the offers:
- Is it an endowment and life insurance? Then there is money after a certain term (experience) – or in the event of death (death).
- Is it life insurance? Then it is pure risk insurance that only pays out a contractually fixed sum in the event of the insured person’s death.
- The “premium-subsidized future provision” is sometimes referred to as life insurance. It is a very special form of insurance that is regulated in the Income Tax Act and is intended to be made attractive by a state premium. But be careful: the state premium is not fixed and the yields are often meaner.
What are the advantages and disadvantages of classic endowment life insurance?
Endowment life insurance is a combination of old-age provision and risk protection for family members. It still makes sense. For contracts concluded after January 1st, 2004, the guaranteed interest on a capital life insurance is only 2.75% (before it was at least 3.25%). There are also non-guaranteed surplus shares.
The conclusion of capital life insurance as a company pension through salary conversion is interesting. The self-employed can deduct this insurance as pension expenses.
- safe investment
- Insurance for survivors
- tax deductibility of contributions
- tax-free payment if the contract runs for at least 12 years and contributions have been paid regularly for at least 5 years
- relatively low return
- long contract periods
- health check required