analyse
For many savers, a capital-forming life insurance policy is part of their pension provision. Due to low interest rates, it has become less and less worthwhile in recent years. Is this changing?
Saving money over many years and at the same time protecting your family – classic life insurance was once considered an important building block for wealth creation. According to the German Insurers’ Association (GDV), the number of all life insurance contracts in 2023 was 80.7 million.
“Maximum interest rate” rises again
New business with traditional capital life insurance was rather poor during the long phase in which interest rates on the capital market were close to zero. However, the increased interest rate level may have given the industry a little boost. Insured persons can now expect a slightly higher return on this form of capital formation. The so-called “maximum actuarial interest rate” set by the Federal Ministry of Finance and the financial supervisory authority BaFin is set to rise from 0.25 to 1.0 percent next year. This is the first increase in around 30 years (see graphic).
The guaranteed interest rates on new insurance contracts are usually based on this maximum actuarial interest rate. In addition, thanks to the more favorable interest rate environment, there is also the prospect of higher surplus participation, which the insurer must pay out to customers from its earnings. Last but not least, a classic life insurance policy usually also offers survivor protection. Insurance companies are currently already attracting customers with so-called “conversion tariffs”. New customers can take out a contract now, but will automatically be switched to the new, supposedly better, conditions in 2025.
However, there is no reason to rush into a decision on one of the tariffs, says Stiftung Warentest in a recent statement. It is better to “wait and see how the range of offers develops over the next year – and then compare.”
“Costs eat up interest income”
Niels Nauhauser from the Baden-Württemberg Consumer Advice Center does not think that a traditional life insurance policy is a good idea overall: “The bottom line is that the products are very, very expensive and the guaranteed interest income is basically eaten up by the costs,” says the expert. “Then you can hope for surpluses in the next few years, but these are uncertain, not least because some of them remain with the insurers and do not reach the savers.”
Expert Nauhauser recommends investing in cheaper alternatives. This includes investing in the stock market with broadly diversified index funds. The chances of capital gains are also significantly higher here. Nauhauser also believes that investing in the statutory pension, for example through special payments, makes more sense.
Risk protection with separate insurance
Consumers who still want to protect themselves with an insurance solution can take a two-pronged approach, explains Björn Zollenkop, insurance expert at the comparison portal Check24. It is better to take out two separate insurance policies: “One is risk protection. So in case someone dies and you still have protection for the family,” says Zollenkop. “With a term life insurance policy, you get relatively high sums for just a few euros a month.” Comparison portals such as Check24 or Verivox Tariffs can be checked here according to various criteria.
In addition to such term life insurance, you can also pay into a private pension insurance policy, says the expert. This is especially true if you choose the most cost-effective products possible and use at least part of the return opportunities on the stock market through unit-linked pension insurance.
Tax advantages for pension payments
There are also tax advantages when you retire in old age: “If you keep a pension insurance policy for longer, i.e. for twelve years until at least the age of 62, then only the so-called income component is taxed when the pension is paid,” says Zollenkop. “That is then only 20 percent, for example, which you then have to tax at your current tax rate.”
Anyone who still has a traditional life insurance policy today is often faced with the question: should I keep it and wait until the payout? Or should I cancel it because of the low returns and high costs? There is no clear answer to this question, say the experts. Anyone who has an old contract can sometimes expect interest of up to four percent and additional profit participation.
No fear of losses
Before making such an important decision, the contract should be thoroughly examined, for example by a consumer advice center: “Based on the results, you can then decide to make the insurance premium-free because further payments are not worthwhile, while the invested capital is earning good interest,” says Niels Nauhauser.
“Or you come to the conclusion that the invested capital is not profitable and that it is therefore more profitable to invest the surrender value better elsewhere in the future.” However, you should not shy away from terminating your contract for fear of losses due to high costs.
