When is life insurance a good investment? What type of life insurance best suits your needs? Find useful tips and information in this moneyland.ch guide.
Term life insurance can be used to protect your family or other beneficiaries financially if you happen to kick the bucket earlier than planned. Here, moneyland.ch answers all of the most important questions about term life insurance and explains what factors you should consider before getting insured.
What is term life insurance?
Swiss life insurance offers generally fall under one of two categories: term life insurance and permanent life insurance.
Term life insurance is a pure casualty insurance product (like disability insurance). You pay insurance premiums throughout the insurance term which you choose when you first get the insurance. If you die within that chosen term, the insurance company pays your family or other beneficiaries a predetermined amount of money (the insurance benefit).
What is unique about term life insurance?
Life insurance is different from other insurances because insurance benefits do not go to the policyholder but to a third-party beneficiary. That makes sense because money is only paid out if the policyholder dies.
When does getting term life insurance make sense?
Getting pure term life insurance can be financially beneficial if there are people who depend on your financial support.
For example, life insurance can help prevent a family from falling into financial difficulties in the event that the main breadwinner dies an untimely death. Term life insurance can also be used to prevent a surviving spouse or friend from having to carry a large financial load – such as a mortgage or loan – on their own without your income.
Does using mixed life insurance make sense?
Many Swiss life insurance companies offer “mixed” life insurance. This combines term life insurance (which pays out a guaranteed benefit if you die within the term) with permanent life insurance (which builds cash value). You should exercise caution when considering these offers. In most cases, using cash value life insurance products is not recommended as it is rarely an optimal saving and insurance tool. Pure term life insurance is almost always a better choice.
Savings accounts and retirement accounts are much more flexible savings instruments. If you want to invest, using affordable asset managers or online stock brokers is generally much more favorable. For retirement planning, retirement funds and low-cost retirement asset management services provide a cheaper and equally simple way to invest.
Which Swiss insurance companies offer term life insurance?
Most big Swiss insurance companies offer term life insurance. In recent years, a number of new digital insurance providers have entered the market. Swiss term life insurance is offered by:
A number of Swiss banks also offer term life insurance, but these banks only sell insurance from third-party insurance providers. For example, Swiss postal bank PostFinance sells term life insurance from Axa and Raiffeisen sells term life insurance from Mobiliar.
Who can I name as the beneficiary?
In Switzerland term life insurance is offered in both pillar 3a and pillar 3b varieties.
With pillar 3a term life insurance, you do not get to choose the beneficiary. If you die, the insurance benefit goes to your spouse or registered partner. If you do not have a spouse, it goes to your children. If you do not have children, it goes to your siblings, and if you do not have any of those, it goes to your nearest legal heirs.
With pillar 3b term life insurance, you get to choose who will get the money from your life insurance if you die. There are no limitations on whom you can name as the beneficiary.
In every case, your heirs can still receive the insurance benefit even if they reject your inheritance because the money does not belong to you, but to them.
Can I choose between pillar 3a and pillar 3b term life insurance?
Most Swiss term life insurance offers are available in both pillar 3a and pillar 3b versions. Some offers are only available as pillar 3b policies.
The advantage of pillar 3a term life insurance is that you can deduct the premiums you pay as part of the pillar 3a tax deduction. The disadvantage is that you cannot freely choose the beneficiary. For example, you would not be able to protect a partner who is not your spouse or registered partner.
The pillar 3b lets you name any beneficiary you want. The downside is that premiums do not qualify for the pillar 3a tax deduction. While costs can be included in the tax deduction for health, life and disability insurance, the deduction is very limited.
You can find more information in the guide to pillar 3a vs. pillar 3b term life insurance.
Can I change move a term life insurance between the pillar 3a and pillar 3b?
Yes. Most life insurance providers who offer both versions let you convert a pillar 3a policy to a pillar 3b policy and vice versa at any time over the insurance term. But there are exceptions to this rule. For example, Allianz does not currently let you move between providence categories. There are also insurance companies (like SafeSide) which only offer pillar 3b term life insurance.
What is a constant benefit?
When a term life insurance has a constant benefit, the person you name as beneficiary will receive the exact same amount of money regardless of when you die within the covered term.
The death benefit stays the same across the full insurance term. Using a constant benefit makes sense if your dependents will always have the same financial needs across the chosen timeframe.
The majority of term life insurance policies held by Swiss policyholders have constant benefits.
What is a decreasing benefit?
You can also get term life insurance which has an insurance benefit that keeps getting smaller throughout the insurance term. The later on in the insurance term you die, the less money your beneficiary will get from the insurance company.
Generally, the death benefits get lower every year. By the end of the insurance term, the benefit is generally 0 francs.
Example of a decreasing benefit which is reduced by 10,000 francs per year: If you died in the first year, the insurance would pay out 200,000 francs. If you died after 10 years, the insurance would pay out 100,000 francs. By the end of the 20-year term, there would be no death benefit at all.
Life insurance with a decreasing benefit is cheaper than life insurance with a constant benefit. For this reason, using decreasing-benefit term life insurance can be advantageous in many cases. For example, if you are paying off your mortgage, the amount you owe will decrease over time, so you will not need as much insurance to cover your debt. Another case where using a decreasing benefit makes sense is if you want to ensure that your children will be provided for. As your children get older and closer to becoming independent, the amount of insurance you need to cover their living and education expenses goes down.
You can find more information in the guide to constant vs. decreasing life insurance benefits.
How much life insurance can I get?
The options for death benefits which you can choose from vary between insurance providers.
With many Swiss insurers, the minimum death benefit you can choose is just several thousand francs. Some insurance providers only offer life insurance starting from 100,000 francs. Often, higher minimums apply to decreasing-benefit life insurance than to constant-benefit life insurance.
The maximum death benefit you can use also depends heavily on the insurance company. Many Swiss life insurers do not have any fixed limit on the death benefit, but may require additional medical examinations when you choose a very high amount.
How much life insurance do I need?
A good first step is to consider the possible scenarios for which you would possibly need life insurance. For example, if your family will need to live off of the insurance benefit for at least 10 years after you die, then you need to pick a death benefit which after taxes is equal to the income you would normally earn in 10 years. Ideally, you should calculate the maximum possible expenses.
Choosing a death benefit which is too low will result in the insurance not fulfilling its purpose. It is very important to note that the benefit will be taxed, so you need to choose an amount which is higher than the actual financial need in order to cover taxes as well.
The bigger the death benefit is, the higher the insurance premiums will be. Avoid getting much more life insurance than you actually need.
Can I change the death benefit during the insurance term?
Most Swiss term life insurance providers let you lower your policy’s death benefit while your life insurance is active. The premiums will be adjusted to match the lower sum insured.
Many insurance providers also let you increase your life insurance policy’s death benefit, but may require that you take a medical examination before they approve the higher death benefit.
Which factors determine how high my life insurance premiums will be?
The cost of term life insurance – the insurance premiums – vary depending on a number of factors. These include:
You can find the exact premiums with all of these factors accounted for using the term life insurance comparison on moneyland.ch.
What is the difference between gross and net premiums?
Some insurance providers indicate a “net premium” in addition to the standard premium.
Net premiums account for estimated future life insurance dividends. Some insurers pay out a dividend or “surplus distribution” to policyholders in years when their expenses are low in relation to premiums collected.
Net premiums are always lower than standard premiums. However, the net premium is just an estimate, as there is no guarantee that the insurer will achieve a surplus in the future. It is better to count on paying the standard gross premiums. If the insurer happens to pay a dividend which lowers your premium in a given year, that can be considered a nice bonus.
For this reason, it makes sense to compare the standard insurance premiums, as you can do with the term life insurance premium comparison on moneyland.ch.
Do I pay the same premium every year throughout the life insurance term?
There are two different premium models which may be used in term life insurance: fixed premiums and rolling premiums.
Fixed life insurance premiums stay the same across the full insurance term. Most Swiss term life insurance providers use fixed premiums which are levelled. This means that the higher risk in later years is averaged with the lower risk in younger years to determine your fixed annual premium. When you use life insurance with a fixed premiums model, your standard premiums (not accounting for possible dividends) are identical every year. Example: You pay 600 francs every year for a 20-year insurance term. The total cost of the insurance across the full term is 12,000 francs.
Rolling premiums can change every year. As you get older, you pay higher annual insurance premiums. Example: In the first year of a 20-year insurance term, you pay just 300 francs for your life insurance because you are young. But because your premiums go up as you get older, the total cost of the insurance over the full 20-year term is 13,000 francs.
The term life insurance comparison on moneyland.ch accounts for both of these models. The comparison shows both the cost for the first year, and the total cost for the full insurance term.
When do I pay the insurance premiums?
You can usually choose whether you want to pay a monthly, quarterly, semi-annually or annual premium. Some insurance providers only offer annual premium payments.
Do I have to pay more for life insurance if I smoke?
Yes. Smokers have a higher risk of death, on average, than non-smokers. Because of that, they are charged much more for life insurance than non-smokers are. Depending on the insurance company and the customer’s profile, a smoker can have to pay more than twice as much as a non-smoker for the same life insurance.
Other health-related factors like your body mass index (BMI) also affect the premiums charged by some insurance providers.
These factors are accounted for in the term life insurance comparison on moneyland.ch.
Are there big differences between premiums charged by different insurance providers?
Each insurance company has its own premiums for each customer and insurance profile. The price difference between the cheapest and most expensive offers for a given profile can easily add up to more than 10,000 francs across the insurance term. Some offers are twice as expensive as other offers for the same insurance and customer profile. Comparing insurance premiums can save you a lot of money.
The interactive term life insurance premium comparison on moneyland.ch is the most precise in Switzerland, and accounts for your age, the insurance term, the death benefit and other factors. The comparison makes use of more than 100,000 pieces of data.
How do taxes affect term life insurance?
The premiums you pay for Swiss term life insurance can be deducted from your taxable income as part of the general deduction for insurance premiums and interest on savings. The problem is that this deduction is limited, and is often used up by your compulsory health insurance premiums.
Pillar 3a life insurance is more advantageous from a tax perspective because premiums are eligible for the separate pillar 3a tax deduction.
You should also account for the taxes are levied on the money which your family or other beneficiaries will get from the insurance if you die. Term life insurance death benefits are taxed separately from other income, and at special low rates – just like capital withdrawals from occupational pension fund benefits and the pillar 3a. This also applies to pillar 3b term life insurance.
Tax rates vary between cantons. The easiest way to find out how much tax will apply is to ask your local tax office.
Do I have to take a medical examination to get term life insurance?
You normally do not have to take a medical examination when you get life insurance with a low death benefit. In this case, you typically only have to fill out a health questionnaire.
Most Swiss insurance providers do require that you get a medical examination when you apply for a high death benefit.
For example, Helvetia and Pax require a medical examination for life insurance worth 400,000 francs or more. Swiss Life requires a medical examination from 500,000 francs, Allianz and Zurich from 600,000 francs, and Bâloise from 750,000 francs. Generali determines whether a medical examination is required based on your age in addition to the size of the death benefit.
Can an insurance company refuse to give me life insurance?
Yes. Swiss insurance companies are not obligated to provide everyone with life insurance (unlike mandatory health insurance, which insurers cannot refuse you). Your application may be turned down if you have existing illnesses or risky hobbies, for example.
Does the insurance company still pay if I die as a result of carelessness?
In most cases yes. Practically all Swiss insurance companies do not reduce the death benefit when you die as a result of gross negligence. You can use the “gross negligence” filter in the term life insurance comparison to limit results to offers which do not penalize you for gross negligence.
What happens if I become disabled and cannot pay my insurance premiums?
Nearly all Swiss life insurance providers offer optional riders which waive your insurance premiums if you become disabled. If your life insurance has this rider added and you become disabled, the insurer will stop charging you premiums or charge you lower premiums, starting after a given waiting period.
This optional rider costs a fee which is charged along with your insurance premium. The term life insurance comparison lets you limit results to policies which offer this rider by selecting the “waiver of premium” filter.
Can I keep my Swiss term life insurance if I leave Switzerland?
Yes. Most Swiss insurance providers let you keep your life insurance when you move abroad. But you may be required to change the death benefit to a lower amount (as is the case with Axa). Some insurers like Bâloise require that you list a person living in Switzerland or Liechtenstein to represent you.
Many insurers will convert pillar 3a life insurance to pillar 3b life insurance when you leave the country.
What happens if the insured person dies outside of Switzerland?
Swiss term life insurance is valid worldwide. Your death is still insured even if you die in a foreign country.
Are certain kinds of death excluded from life insurance coverage?
Yes. If you commit suicide during the first three insurance years, your beneficiary will get back the total premiums you paid, but will not get the death benefit. Exceptions may apply to suicides caused by mental illness.
If you die while actively taking part in civil unrest or any military or paramilitary activities (other than service in the Swiss army), the insurance will not pay out a benefit.
Which insurance terms can I choose from?
Available terms vary between life insurance offers, but can be as short as one year and as long as 50 years. The deciding factor with all insurance offers is the maximum age up to which you can be insured. Pillar 3b offers may have higher age limits for coverage.
How old do I have to be to apply for term life insurance?
Insurance providers use different rules for pillar 3a and pillar 3b insurance.
Pillar 3a: To apply for a pillar 3a life insurance, you must be at least 18 years old. Some insurers require you to be at least 25 years old. The highest age at which you can apply for life insurance is generally just below the legal retirement age – such as age 61 for women and 62 for men. Pillar 3a life insurance ends when you reach legal retirement age, at the latest.
Pillar 3b: Insurance companies can choose their own age limits for pillar 3a life insurance. Some insurers even let you get life insurance for your children. Some life insurance providers accept new applicants as old as 70 or even older. Depending on the insurer, it is possible to remain insured up to age 85.
You can find the age limits for each life insurance offer on the individual information pages of offers in the moneyland.ch comparison.
Can I get life insurance which covers me and my spouse?
Multiple-life insurance is not available in Switzerland. Multiple-life insurance covers two lives with one insurance policy, but only pays out one death benefit when the first of the two insured people dies.
Some Swiss insurance providers offer partner insurance which provides one death benefit per insured person. These include Axa, Bâloise, Helvetia, Mobiliar, Pax, Swiss Life, Vaudoise, and Zurich.
SolidaVita and some others even give you a discount when you and your partner get insured together.
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