Life insurance is basically a savings contract that comes with risk protection and is linked with death. Life insurance policies are often also offered in combination with insurance for occupational disability. In the event of survival, the balance is paid out in full at the end of the contract, usually at the start of the pension, or can be used as an additional pension for the old-age provision through the insurance company. If the insured dies, a death benefit, usually the sum insured, is paid to the surviving dependents. Unfortunately, however, the entire insurance contribution is not saved, because the insurance companies deduct money for the risk coverage, commission for the brokerage and for the costs for the administration. Such services are also provided by Llama Life Insurance.
Does life insurance make sense for old-age provision?
Since capital-forming life insurance policies usually run for several decades and generally only fall due at the start of retirement, saving for old-age provision through a policy makes perfect sense. Once completed, the contributions are debited month after month. Although many insured dissolve contracts during the term, the “forced saving” of life insurance is still approved by consumers.
Since there are also other pension options (fund savings, shares, real estate, etc.) for additional retirement provision, consumers should consider all alternatives before signing up. In principle, advises that the saving process and death protection be separated.
Risk protection is important
No question, risk coverage for death or disability is very important. Every citizen should reasonably and adequately hedge his existential risks. “Flat-rate insurance protection” through life insurance can be a good basis, but in many cases, risk insurance that only covers death is the better solution. Singles without children do not need death protection and families often need individual (= higher) coverage.
These factors determine the return on life insurance
The return on capital life insurance that can be expected when it expires depends on the following factors:
The savings portion is subject to a so-called guaranteed interest rate and applies for the entire term of the insurance.
- Administrative costs
The insurance company charges administrative costs for the ongoing processing of the policy. The more economical and effective an insurance company works, the higher or lower these costs are.
When concluding the contract and for the subsequent administration, intermediaries receive a commission. These payments also gnaw on the return.
Life insurance companies calculate their policies very carefully. If they do business well, can invest more than the guaranteed interest rate, or the ongoing risk costs are low, you can let customers participate in the surpluses generated year after year.
- Final profit/bonus
The insurance companies also invest the savings in real estate and capital investments, for example. Each contract holder will participate in the so-called valuation reserves at the end of the term. If, for example, the total market price of the investment property is higher than the balance sheet value, these valuation reserves or portions thereof can be paid out as a final bonus when the contract expires.