What is Savings Insurance

It seems that Swiss life insurance companies offer something called savings insurance. From what I gather, it looks like some variety of permanent life insurance. Could you let me know what savings insurance is?

In Switzerland, the term savings insurance (German: Sparversicherung) is used to denote permanent life insurance which is used primarily for saving. It does not normally include term life insurance.

This type of life insurance typically provides a living benefit when a policy matures. The benefit is paid out to the policyholder while they are still alive, rather than being paid to a third party as a death benefit when the policyholder dies.

Over the insurance term, the premiums paid by the policyholder (minus administrative costs and commissions) build their equity in the policy. This equity is known as the policy's cash value.

If the insurance company's business and investments perform well, it may pay out dividends to the policyholder. These are typically applied to the policy's cash value.

By the time the policy matures at the end of the insurance term, the cash value of the policy will be roughly equivalent to the total premiums paid, plus possible dividends.

In this way, a "savings insurance" whole life insurance policy performs a similar function to savings accounts from banks.

The primary difference is that, once an insurance policy is taken out, the policyholder must pay premiums on schedule until the policy matures in order to keep the policy and receive the benefit.

The cash value of a whole life insurance policy can be pledged as collateral for mortgages, or for policy loans.

Important: The premiums which you pay during the first months or years of the insurance term are used to cover administrative fees. You only begin building equity in your policy once the administrative costs have been covered. This means that if you surrender (give up) your policy during the first months or years of the insurance term, you will get back little or none of the money paid in premiums. Only use whole life insurance if you are completely sure you can meet premium payments until the end of the insurance term. If you are not absolutely sure that you can meet premium payments over the full term, consider saving using a savings account instead.