Can I afford the premium – even if things get tighter financially?
You should ask yourself this question right from the start in order to avoid an expensive cancellation later. It is important not only to keep an eye on the premium itself but also on any additional costs and adjustments:
- Pay attention to the frequently advertised dynamization of the services, which are primarily associated with “maintenance of purchasing power” or value adjustment (“Without a new medical examination”) is described as follows: An automatic adjustment of the benefit or sum insured to an index (e.g. a fixed index) means that the sum insured is increased from year to year, for example by 4%. This is good in itself, but the increase can also make the premium more expensive and in unfavorable cases, the premium increases proportionally more than the benefit, ie the sum insured. This is justified, among other things, by the increasing risk costs with increasing age and that the adjustment of the insurance premium is to be classified as a new contract with additional commissions. In the case of existing contracts, it is therefore essential to check how the increase in the sum insured (“dynamic clause”) affects the amount of the premium. If the premium is too expensive or the dynamic clause can be waived – with the suspension of the adjustment, the sum insured and the premium remain stable.
- The monthly, quarterly or half-yearly payment of the premium can be expensive because of the offsetting of so-called surcharges during the year: In the long term, these surcharges are real yield guzzlers: For example, they can amount to 6% if the premium is paid monthly, 2% if paid half-yearly. If you pay annually, there are no fees.
Do the math with the AK Insurance Expense Calculator!
Are expensive additional tariffs worth their money?
Additional tariffs for accident or disability insurance can also increase the premium considerably. Do you need such additional tariffs? And aren’t they overpriced? In order to be able to assess this better, you should obtain comparative offers for an individual tariff – for example accident insurance. Then compare this with the premium for life insurance without an additional tariff.
Where can I get the most bang for my buck?
- Always obtain several insurance offers: Even if the returns – especially with secure investments in fixed-income securities – do not grow to the sky, the costs of the insurance can differ significantly. An AK survey on future provision shows, for example, that the acquisition costs for 8 insurers differ between 340 and 1440 euros. To put it simply: With similar returns on the money and capital markets, the costs are also a decision criterion for product selection.
- The effective guaranteed interest rate is a rate of return that indicates how much you really have left after deducting the costs. So far, it has not been automatically specified in offers. Another key figure is the effective total return, which indicates the expected but non-binding total return after deducting costs. With the change in the law, there will also be a new mandatory tabular presentation of the costs introduced for all capital-forming life insurance policies that customers must receive before concluding a contract. This table also includes the so-called “savings premium” as a percentage of premium performance. The savings premium is that part of the premium that is not used for insurance company costs and for the risk premium (mortality risk).
- Distinguish exactly what is contractually guaranteed and what is non-binding or merely promised.
The non-binding services are usually marked with a footnote.
- The footnote then reads that the values given are only non-binding and are based on “current distributions or profit sharing”. There can be major differences between the guaranteed benefits (guaranteed maturity capital or guaranteed annuity payment per month) and the probable, non-binding benefits (sum insured including profit sharing or probable annuity payment including profit sharing).
- Note that there are also classic life insurance policies without a contractually guaranteed interest rate. Ask which product benefit compensates for the loss of guaranteed interest.
Have you changed your mind yet? your right to withdrawal
You don’t want to afford life insurance after all, or have you found a better offer? With life insurance, there is a 30-day right of withdrawal from the conclusion of the contract: In this way, you can revise the contract again and are protected from being taken by surprise.
What to look out for in the event of early termination
Would you like to terminate your life insurance early?
- Inquire beforehand about the termination modalities, because premature termination of the contract can be expensive. The online tool “Cancel insurance” shows how you can cancel your insurance contract.
- When canceling, pay attention to the so-called surrender values, which must be stated in the policy.
- The surrender value is the liquidation value in the event of termination.
- Please note that the administration costs continue even if you are exempt from premiums!
After the end of the contract: annuity payment or capital payment?
You paid into your life insurance for years, now the contract is expiring. What is more attractive – a monthly pension payment or rather a chunk of money at once? A simple recipe is this: Compare the sum of the calculated annuity payments per month for an assumed age and the lump sum that you would receive immediately. What weighs more depends not only on the expected inflation, but also on the question of whether you currently have capital requirements and, for example, want to pay off a loan or make a larger purchase.