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THURSDAY, APRIL 15, 2021

What should you look for when taking out term life insurance?

What should you look for when taking out term life insurance?

In addition to the conditions and the quality of the health questions, the following factors play important roles:

Answering the health questions.

You should always answer the questions about your health, occupation, lifestyle and hobbies carefully and correctly. If there are discrepancies or the information is incomplete, you jeopardize important insurance coverage - and, in the event of an emergency, your survivors’ entitlement to benefits. Naturally, it is difficult to remember all the details from your medical records. It is therefore advisable to consult your health insurer or your doctor so that a conclusive picture emerges in the event of queries from the insurance company.

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Choice of profit distribution

You can choose between two options: On the one hand, you can have the profits earned by the insurance company offset directly against the premiums - you will recognize this by the difference between the gross and net premiums. However, the actual premium to be paid may well fluctuate if the insurer’s profit situation changes. This also applies to the second option: On the other hand, you can claim a bonus insurance sum from the profits. However, if the profits are reduced, this can be cancelled in the event of an emergency.

Death benefit

Other important questions should address the terms of the death benefit, such as the payout date or the exclusion of certain types or causes of death. In some cases, waiting periods are also agreed upon; in these cases, the contract must run for a certain amount of time before you or your survivors can claim a benefit - this is not recommended.

Subsequent insurance options

An interesting possibility is provided by the so-called subsequent insurance guarantees: In this way, you can agree on the chance to increase the sum insured and subsequently also the premiums on certain occasions without having to pass a new health check. Examples of such occasions include marriage, the birth of a child or an increase in your income by a certain amount.

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Deferral of premiums for financial bottlenecks

This module can also be important: Some insurers, for example, maintain insurance coverage even if you cannot afford the premiums for a certain period of time - although this is the exception.

Conversion to endowment insurance

This inclusion gives you the right to convert term life insurance to an endowment option within a certain period of time from the date the policy is taken out, without a health check. This could be interesting if, for example, your income has increased dramatically.

Can other additional modules be added to term life insurance?

Term insurance can be combined with supplementary accident insurance, which doubles the sum insured at most if the insured person dies as a result of an accident. This naturally costs additional premiums and is recommended if you have a high-risk profession or indulge in dangerous hobbies. In contrast, the second module is well worth considering: Supplementary occupational disability insurance regularly pays out in the event that you are only able to perform less than 50 percent of your last profession for health reasons. You have the choice of securing an annuity or limiting yourself to premium exemption for the BU case. Then the BU supplement would take over the premium payment for your term life insurance. However, these inclusions cannot be shown in the term life insurance comparison, because here again individual risk assessments are required.

Are taxes payable on the benefits of term life insurance?

While the premiums for term life insurance can be claimed as pension expenses within the maximum amounts, the question of taxation of the death benefit must be answered depending on the specific conditions:

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Case 1: If you take out term life insurance on the life of your partner and stipulate that the premium payer receives the benefit, you can avoid inheritance tax. This constellation can be realized not only in the form of term life insurance on two linked lives, but also with cross-over coverage.

Case 2: You take out the policy on your own life, and your partner or children are heirs. In the event of a benefit, inheritance taxes would then only have to be paid on the amounts that exceed the high tax-free amounts - namely 500,000 dollars for spouses and 400,000 dollars for children.

Case 3: If you insure your own life and provide for persons to whom you are not related as heirs, then they can only claim an exemption amount of 20,000 dollars in inheritance tax - above that, at least 30 percent tax would be due.

Use term insurance comparison wisely

To determine the best term life insurance policy for your needs, only a few inputs are required:

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  • Your age
  • the sum insured
  • the term
  • the preferred method of payment
  • the question about smoking

The list of results shows you which providers come into question for your case, which premiums regularly accrue and which contractual conditions you can expect. Of course, we will also show you if a tariff has performed excellently in the term life insurance test.

During the evaluation, you will quickly see that a cheap term life insurance does not necessarily have to be a cheap term life insurance: Carefully weigh the qualitative features, such as the option for premium waivers or an early death benefit, in relation to the premiums to make a viable decision.

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