Life Insurance: Useful Tips For Choosing the Right Offer

Term life insurance can be a useful instrument with which to safeguard your financial life. But because life insurance is a longer-term commitment, it is important to consider a few important criteria before taking out a policy.

1. Determine the need

Taking out term life insurance normally only makes sense if you have dependents which rely on you for financial support. Carefully consider how your death would impact the financial well-being of your spouse, children or even your business or charitable causes which you care about. For example, if you expect to take on a large amount of debt or mortgage a home, a life insurance benefit could help your family to pay off the debt in the sad event that you pass away before the loan is repaid.

2. Consider decreasing benefits

In Switzerland, term life policies are offered in both constant-benefit and decreasing-benefit varieties. Decreasing-benefit policies are much more affordable because the benefit decreases at a fixed rate every year of the insurance term. This type of term life insurance is sometimes referred to as mortgage life insurance because it is particularly well-suited to individuals who are taking on a large amount of debt which will be amortized at a steady rate over the loan term. The decline in the benefit decreases in keeping with the amortization of the loan, so that you only pay for the coverage necessary to safeguard repayment of the loan. Constant benefit term life insurance, on the other hand, delivers a fixed benefit throughout the entire insurance term. This is useful if you want to leave a large benefit (as a legacy, for example) to dependents or if you have an open-ended loan or non-amortizing mortgage which must be paid off in the event of your death. Read the guide to constant-benefit vs. decreasing-benefit life insurance for more information.

3. Look into premium payment insurance

Some life insurance providers offer premium payment insurance as a rider for term life insurance. This insurance covers all or part of your life insurance premiums – normally for a predetermined length of time – in the event of your becoming disabled. Some riders also cover other hazards such as temporary unemployment. This prevents your losing your life insurance coverage if you cannot afford to pay premiums at some point within the insurance term. If you have any concerns about being unable to meet your premium payments in the future, taking out this coverage along with you term life policy can make sense. Some policies include this coverage by default, but it normally comes as an optional rider at an added premium. If you do not need this insurance you can lower your premiums by excluding it.

4. Use the right pillar 3 model

In Switzerland, term life insurance policies are based on the 3a or 3b categories of retirement savings. Premiums paid for 3a policies are tax deductible (annual limits apply), but your choice of beneficiary is limited by Swiss inheritance rules. Premiums paid for 3b policies are not tax deductible, but you can choose any person or entity as your beneficiary. Find more information in the guide to 3a vs. 3b term life insurance.

5. Avoid cash-value life insurance

In Switzerland, permanent life insurance which combines life insurance coverage with a cash value solution (equity in the insurance policy) is often called mixed life insurance. As a general rule, using separate term life insurance and savings accounts or investment solutions is a better financial move. The reason for this is that you pay high administrative fees on top of the actual life insurance premiums and savings contributions.

Additionally, you generally lose money when you terminate cash-value life insurance ahead of schedule (if you cannot afford the premiums or want to migrate to a different saving solution, for example). The moneyland.ch life insurance comparison only includes term life insurance offers. Find more information in the guide to mixed life insurance vs. term life insurance.

6. Take time to compare offers

There are major differences in the premiums charged for term life insurance policies from different insurance providers. Because even small differences in premiums can add up to significant amounts of money over long insurance terms, you can save a lot of money by finding the most affordable coverage for your specific needs. The precise, unbiased Swiss life insurance comparison by moneyland.ch makes it easy to find the right term life insurance at the best price.

More on this topic:
Compare Swiss term life insurance offers
Guide to choosing term life insurance