How did the life insurance industry start?

Unit-linked life insurance

Our recommendations for your protection - including tariff comparison (2021)
More than just basic coverage: with unit-linked life insurance, policyholders have real opportunities for a good return. With the ability to determine the fund itself, the policyholder can also decide whether he wants to invest more risk-consciously or more safety-oriented.

Table of Contents

Security-conscious investors should weigh up

In the case of unit-linked life insurance, the insured must take into account a number of special features. First of all, a guaranteed benefit is usually only granted in the event of death. In the event of survival, however, there is no guaranteed pension payment. The maturity payment will correspond to the current repurchase value of the fund units, which can be lower than the contributions paid. This is why unit-linked life insurance (life insurance test) is not very recommendable for security-conscious investors. However, many insured persons have optimized the selection of their funds and the combination of investment strategies. From investing in guarantee funds through process management to hybrid investment models, the spectrum ranges with which security-conscious investors can invest in fund life insurance without having to accept the great risk of loss.

High costs reduce the return

One of the major disadvantages of fund life insurance is the high cost. The insurer has a high administrative burden, which he can reimburse from the premium payments. With a fund life insurance policy, you must therefore assume that only a small proportion of the contributions paid will be invested in the first few years. The surrender value from a fund policy is correspondingly low, especially in the first few years. Insured persons can protect themselves from high costs by taking a careful look at the preferred insurer. An insurance comparison will show which company offers an acceptable cost structure. In order to find the best fund life insurance in the field of tension between a high-yield yet safe and inexpensive investment, a look at the current test winners is essential. It must be combined with an independent insurance comparison that is tailored to the needs of the insured.

The fund life insurance at Stiftung Warentest

Unit-linked life insurance was examined by Stiftung Warentest in 2013. A total of 58 offers from 22 insurance companies were examined in the test. Although it turned out that the returns are very acceptable compared to traditional pension insurance, depending on the provider, the costs were also disproportionately high. In the test, the costs, the investment variants and the transparency of the insurance product were analyzed; the costs were included in the overall assessment with 50 percent. The investment variants were still taken into account at 40 percent, while transparency should only contribute ten percent to the result. In each case, the insured event to be reimbursed in the event of death or the existing fund assets to be paid out was considered. The results were different in each case.

Unit-linked life insurance put to the test

The test winner among the insurance companies that reimburse the premiums paid in the event of death was Hannoversche Leben mit dem Tariff FR3. It received an overall rating of 1.7, which corresponds to a “good”. The Condor with the followed in second and third place Tariff 778 Comfort F and the grade 2.6 as well as the Gothaer with the Tariff FR09-1 with the judgment 2.7. Among the companies that pay out the fund assets, the Interrisk came with the SFRV tariff and a grade of 1.7 for a good result and thus in first place. This was followed by the HanseMerkur with the grade 2.6 and the Condor with the Tarif 778 Comfort F with the result 2.8. What is striking is the large gap between the test winner and the respective following companies.

Unit-linked life insurance advantages and disadvantages

Advantages of investing in a fund:

  • The policyholder has the opportunity to actively participate in the investment process. Because the selected investment can be changed during the investment period; the life insurance premium can also be invested in several funds.
  • Due to the low interest rates of classic life insurance, unit-linked insurance may be more profitable due to the higher potential for returns.

Disadvantages of the fund investment:

  • The lack of a capital guarantee means that there is a higher risk for the investor when investing, because the return results from the success of the fund
  • Since there is no regulation on acquisition costs for fund policies, these can in some cases be much higher than those of a classic life insurance policy

Sustainable fund policies

Investing in sustainable investments is becoming increasingly popular in Germany. For example, more than 100 million euros are now being invested in Ökoworld funds. More and more insurance companies attach importance to offering ethically, socially and ecologically correct investment opportunities. Because many people do not want to use their money to promote subsidies for nuclear energy, oil or the armaments industry, for example.

Unit-linked life insurance in tax

If you choose a unit-linked life insurance as retirement provision, you should deal with the taxation of the same in advance. Because this type of life insurance cannot be declared as a special expense in the income tax return. However, if the term of the contract is twelve years and the term of the contract does not end before the age of 60 or, in the case of contracts concluded from 2012, before the age of 62, there may be tax advantages for the insured person. In addition, the income from the unit-linked life insurance is exempt from tax during the savings phase.

Cancel unit-linked life insurance

In general, unit-linked life insurance policies are designed for long-term savings. This is the best way to even out any price fluctuations. The insurance policies usually have a contractually fixed term that the insured must adhere to so that he does not suffer any financial losses. If the contract is terminated before this period has expired, this can mean serious financial losses for the insured person.

Sell ​​unit-linked life insurance

If you want to get rid of your unit-linked insurance, you can not only cancel it, but also sell it. Often this happens because the insured needs money immediately or because the monthly contribution cannot be raised. A few selected secondary market companies buy fund policies. The advantage of selling the fund policy is that there may be some tax advantages over termination.