Is getting an equity-linked life insurance policy risky?

I am looking into life insurance and had a question about equity-linked life insurance. It seems to make sense that the money tied up in a life insurance policy should be put to work making more money for me. But how risky are these types of policies? Could I lose my insurance benefit if investments crash?

Hi there,

Whether or not permanent life insurance which is linked to equities could work for you depends primarily on your risk tolerance.

Because the assets you hold in an equities-based policy are invested in stocks, bonds and other securities, they could potentially grow in value much faster than those held in life insurance policies with a flat interest rate. However, your life insurance assets could also dwindle if investments perform badly.

If you have money which you would like to save towards retirement or beneficiaries and you can afford to risk losing a large part of that money to potentially gain more than interest rates allow for, then equities-based life insurance gives you that option.

Important: A stamp tax equal to 2.5% of your life insurance premium is levied on sing, one-off investments into premanent life insurance policies in Switzerland. To avoid this tax, you must pay premiums annually and the difference between the lowest and the highest premium you pay cannot be greater than 20 percent.

Best regards from Moneyguru

More on this topic:
Life insurance comparison

Life insurance that has cash value (such as whole life insurance, mixed life insurance, or savings insurance) is generally a sub-optimal savings and investment solution. The reason is that the costs are high compared to getting term life insurance (pure life insurance with no cash value) and then using a savings account to save or investing with a cheap online trading platform or asset manager.

You can find more information in the guide to mixed life insurance vs. term life insurance.