1. Introduction
The question of eligibility in the event of a life insurance policy becoming due and paid out is complex and a frequent point of contention in practice.
Even answering who is the beneficiary or beneficiary of the life insurance raises legal problems depending on the case scenario. Things become even more complicated if there is also an assignment as security.
Credit institutions in particular allow existing life insurance policies to be assigned in addition to other collateral when granting loans.
These security assignments then remain in place for years, even if some of the original loans have already been largely or even completely repaid.
The answer to who ultimately receives the payout amount from a life insurance policy depends, on the one hand, on the type of life insurance, the contractual structure and the question of whether effective collateral has been ordered.
In detail:
2. The different types of life insurance
There are different forms of life insurance:
a. Pure term life insurance
Pure term life insurance protects the death of the insured person. The insurance company pays if the insured person dies. It is therefore insurance in the event of death.
b. Capital-forming life insurance
With endowment life insurance, life insurance for the event of survival, the insurance company pays if the insured person lives to see a certain day (so-called insurance for the event of survival).
c. Combined life insurance
Finally, there is also combined life and death insurance, in which the insurance company pays if the insured person dies by a certain day and if the insured person lives to see that certain day.
3. Those involved in the insurance relationship
The contractual partner in life insurance is the so-called policyholder. This person is obliged to pay the insurance premiums.
The insured person is the person on whose life the insurance is taken out (see Section 150 VVG). This means that the death or passing of the insured person represents the insured event that triggers the insured sum.
The insured person can be the same as the policyholder, but does not have to be.
The policyholder decides who is the insured person when concluding the insurance contract. With life insurance, the insured person cannot be changed after the contract has been concluded, as the insurance company calculates the premiums depending on the risk in this case and the risk is determined by the insured person.
4. The subscription right as an essential criterion for life insurance benefits
The sum insured is paid out to the beneficiary in the event of an insured event (death or loss of life of the insured person).
Either the policyholder himself or a third person is entitled to benefit.
The policyholder decides who is entitled to benefits by naming them individually in the insurance contract.
There are two types of eligibility:
a. Revocable subscription right
With a revocable subscription right, the policyholder can change the person entitled to the subscription without their consent. The consent of the insurance company is also not required (see Section 159 Para. 1 VVG).
b. Irrevocable subscription right
If the subscription right is irrevocable, the policyholder can only change the subscription entitlement with the consent of the beneficiary.
The subscription right forms the legal basis for the right to payment from life insurance. Anyone who is a beneficiary is usually also a claimant for life insurance payouts.
5. Assignment of life insurance as security and its legal effect
An effective (security) assignment to the life insurance can postpone the right to pay out.
The policyholder must assign life insurance claims because he is the contractual partner of the insurance contract and therefore the cedant.
There is no need for consent from the insured person.
If the policyholder is not the person entitled to receive benefits, but rather a beneficiary third person, the right to receive benefits must be revoked.
Otherwise, the beneficiary and not the bank would receive the insured sum in the event of an insured event. If the subscription entitlement was only revocable, it is sufficient if:
the policyholder revokes the right to purchase. Of course, this must be documented in a legally secure manner in the event of a dispute.
If the subscription right has been granted irrevocably, the beneficiary must waive his or her subscription right. The credit institution must obtain the consent of the beneficiary to assign the life insurance. This must also be documented in the event of a dispute.
In addition, Section 13 of the General Conditions for Life Insurance stipulates that assignments of a life insurance policy must be reported to the insurance company in text form. If this is not done, the assignment as security is invalid. The original withdrawal authorization then remains.
The special feature that must also be noted is that the insurance certificate is a bearer document (see Section 4 Paragraph 1 VVG in conjunction with Section 808 Paragraph 1 Sentence 1 BGB). This means that the insurance company is entitled to pay with discharging effect to the person who has the insurance certificate and can prove it to the insurance company. If the bank does not have the insurance certificate, this can represent an obstacle to payment and a risk to the assignment as security.
6. Conclusion
The questions surrounding the right to pay out a balance from an existing life insurance policy are complex even in the basic case.
The legal situation can be even more complicated if an assignment as security has been made in favor of a credit institution.
In this case, both the insurance contracts regarding life insurance as well as the contracts and the implementation of the security assignment must be checked by an expert lawyer in order to protect the law.
Even the smallest errors and discrepancies can lead to a postponement of the right to pay out from a life insurance policy.
There is therefore a lot at stake for those involved.
This article does not represent specific and individual legal advice, but rather only provides a rough initial overview of the very complex legal matter described. You can only obtain legal certainty for your specific case constellation through coordinated examination and advice from an expert lawyer.
I would be happy to assist you as a lawyer and specialist lawyer for a legal assessment and assessment of your case and to accompany and support you with financial transactions or the assertion of liability claims and compensation for damages from financial transactions and investments as well as with banking law issues regarding loan collateral and loan agreements. Please feel free to contact me by phone or write to me.
I advise nationwide on site or via Zoom as a specialist lawyer in the legal areas of corporate law, tax law, insolvency law and banking and capital markets law, especially in the cities and metropolitan areas around Stuttgart, Heilbronn, Karlsruhe, Freiburg, Ulm, Augsburg, Munich, Frankfurt, Wiesbaden and Saarbrücken , Kaiserslautern, Bonn, Wuppertal, Duisburg, Nuremberg, Münster, Saarbrücken, Düsseldorf, Cologne, Dortmund, Hanover, Kassel, Leipzig, Dresden, Bremen, Hamburg and Berlin.
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