Life insurance policies are among the most popular insurance policies in Germany. They come in a wide variety of forms, as pure risk insurance, as endowment insurance, with fixed amounts or on a declining scale.
The term life insurance
Covering the life risk of the insured is the basic function of life insurance. In practice, term life insurance therefore serves either to secure the provision for the insured’s surviving dependants or to secure the claims of creditors, i.e. usually to secure bank loans. The sum insured must be sufficient to provide for the surviving dependants – in fact, however, many risk insurance policies are probably not sufficient for this purpose. This is because the sum insured must be sufficient as a lump sum or in combination with a pension model to provide the surviving family with sufficient net maintenance and at the same time enable further contributions to their pension insurance. It should be borne in mind that the surviving spouse not only has to make contributions to his or her own pension insurance, but also has to compensate for the reduced widow’s pension by means of supplementary insurance because the pension of the prematurely deceased is frozen. The required sum insured can be estimated by assuming about 75% of net income (after tax but before insurance) and multiplying the annual amount by the number of lost working years of the deceased.
The policyholder should always nominate a beneficiary, otherwise the sum insured falls to him or her, i.e. to the estate, and is subject to inheritance tax.