Benefits of term life insurance

Benefits of term life insurance

Protection for dependents: If one or both parents die, this can cause financial difficulties for the surviving family. Term life insurance can protect family members against this risk.  

Payment after death: After the death of the insured person, the insurance pays what is known as a “death benefit” to the surviving family. The amount is a kind of compensation for the loss of financial support from a parent. A “linked term life insurance” can protect joint spouses or company owners should one of them die. 

Disadvantages of
term life insurance

Costs are individual: Individual factors are decisive for how many terms life insurance costs. The insured person’s age, risky leisure activities (e.g. skydiving), previous illnesses, or an unhealthy lifestyle (e.g. smoking) drive up the costs.  

No own old-age provision: The insured person is not protected by the term life insurance, but only the beneficiaries of the insurance.  

Notice: The policyholder should inform the beneficiary about the life insurance while they are still alive. Especially if the beneficiary is not the marriage at the same time. This means that he does not have to contact the 

sole heir or the community of 

heirs separately. He can simply have the amount paid out.

capital life insurance

‌Endowment insurance is a hybrid of death benefit and savings plan: ‌ ‌1

) One part of the money is saved and widely invested in bonds. ‌ ‌2

) The other part of the money is used as security in case of death. ‌ ‌If the insured person survives the end of the contract – this is also called “survival” – the insurance income is paid out. ‌ ‌Nowadays you shouldn’t take out endowment insurance anymore. Older endowment life insurance policies can still be of some use because of the high-interest rates. In the case of newly concluded contracts, however, the disadvantages clearly outweigh the disadvantages. Anyone who has already taken out endowment life insurance should recalculate carefully whether the insurance is worthwhile at all.

Advantages of
endowment insurance

Tax benefits: Withdrawals may be tax-deductible. 

Tax-free: If the insurance was taken out before 2005 and the term is at least 12 years, the income is tax-free. 

Final bonus: This is paid out at the end of the contract period.  

High yields for old contract holders: Old contracts often have high guaranteed interest rates. In the past, a rate of up to 4% was even granted (in comparison, since 2017 a vanishingly small interest rate of only 0.9%).‌

Disadvantages of an
endowment life insurance

High costs: It is an expensive variant of life insurance since risk protection and asset accumulation are “mixed” in one contract. 

Low return: The guaranteed interest rate has fallen sharply over the years and is currently 0.9%. Surplus shares are low. 

Difficult to classify: As a mixed product, endowment life insurance cannot be precisely classified. It is risk protection combined with wealth accumulation.  

Opaque cost items: It is difficult to calculate the actual cost. 

Very long term: Less than 50% of endowment life insurance contracts run for the entire term of the contract. Precisely because of the long term, most are terminated early. Policyholders often need their money much earlier.‌

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