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Can a risk insurance be borrowed on?Yes, depending on the General Terms and Conditions of Contract and additional conditions, the insurance policy can be pledged or borrowed on. Often, risk-life policies serve as hedge for mortgage loans.
What does the risk life insurance cover in the case of death?The insurance covers the case of death caused by accident or illness. There are benefit differences when it comes to coverage of mental illnesses and suicide. Within the contract duration, the insurance company makes a one-time payment or pension payments in the case of death. In the case of survivorship no benefits are made.
What is a risk life insurance?The risk life insurance only covers claims for cases (in this event death) that occur within the period covered by the insurance. If the event does not occur within this period, no insurance benefits are made.
What if you start smoking after the policy is issued?If you took out your risk life insurance at a non-smoker rate, you have to report any changes according to the insurance conditions. You will then be classified in the smoker rate with increased insurance premiums.
What are the tax benefits?
A life insurance can be taken out as part of either pillar 3a or pillar 3b.
The fixed pension plan (pillar 3a) focuses on family matters. Legal requirements define when a payout is made and who is to be registered as the beneficiary.
Furthermore, as opposed to the flexible pension plan, the fixed pension plan provides tax benefits. Direct federal, cantonal and municipal taxes allow employed or self-employed people to deduct their premiums to the fixed pension plan up to the statutory maximum amount from their income.
The time limit for paying premiums to the fixed pension plan is five years after the regular AHV retirement age; provided that you can prove that you continue to be in gainful employment.
The beneficiary is determined by the ordinance on the tax deductibility of contributions to recognized forms of benefit schemes (BVV 3).Entitled persons are firstly the spouse or, respectively, the registered partner, secondly the lineal descendants (or persons treated as such, e.g. civil partners). Then, the order of the remaining legal heirs (parents, siblings, other heirs) can be determined.
A payout is taxed at a reduced tax rate.
With pillar 3b insurance premiums can be deducted from taxes as flat rates. What is more, the capital of the free pension is quickly available if need be.
When the insurance sum is paid out, however, income taxes in the amount of 10% to 15% become due. If the spouse or the children are the beneficiaries, this tax could, under certain circumstances, be avoided. If tax benefits are explicitly unwanted and provided that the General insurance conditions and other insurance conditions allow it, the insurance benefit is added to the inheritance and, in most of the cantons, is passed on to the heirs as tax-free capital.
How to proceed in the case of death?
In case of death as the result of a disease: Contact your doctor. If he or she cannot be reached, contact your GP. If the latter cannot be reached either, contact the emergency doctor. The doctor determines the cause of death and issues a death certificate. In case of an accident / discovery of a dead person: Contact the police for accident investigations. This applies to all kinds of accidents (traffic accident, accident at work, domestic accident and other accidents). Death in the hospital: The hospital, clinical or home administration takes care of the necessary formalities and has the death certificate issued. Immediately inform the insurance company about the death.
- Obtain the policy/policies
- Which benefits are granted?
- Which documents does the insurer need in order to be able to pay out the insured benefits?
- Send claims by registered letter; refer to the policy number or the membership number. Make sure to include a copy of the official death certificate (can be obtained at the civil register office of the place of death) or the family record book.
Reimbursement can be claimed for premiums paid in advance.
When do I need a risk life insurance covering death?
The risk life insurance in the event of death protects the surviving dependants against major financial claims. This is particularly true for investments such as property, which are often financed by mortgage loans or credits, and can result in heavy financial burdens for the surviving descendants after the death of the insured person.
A risk life insurance offers protection against financial problems in the event of death of the principal earner As a rule of thumb: The amount of the insurance sum with a risk life insurance should be five times the gross annual salary including any possible depts.
Regarding mortgages for property current interest payments as well as planned mortgage repayments can be protected by the risk life insurance. Depending on the type of credit a product with decreasing or constant lump sum is taken into account. Choosing the insurance product carefully bears a huge saving potential. A decreasing lump sum means significantly lower costs of premium.
Business partners can also ensure mutual financial protection by means of a risk life insurance. However, a risk cover can also be beneficial for entrepreneurs, stakeholders and key members, especially when considering the economic consequences of their absence.
How to decide whether to choose a risk life insurance with a decreasing or a constant lump sum
This greatly depends on the purpose of coverage. For example, if the coverage includes a second mortgage that is to be reimbursed completely, a risk life insurance with a decreasing lump sum death benefit is recommended. However, if the children’s education or the loss of the principal’s earnings is to be covered, an insurance with a fixed insured sum is advisable. From a financial perspective, it is sensitive to choose a decreasing insured sum whenever possible.
Risk life insurance - what needs to be considered
Amount of the sum insured:
If the insurance is supposed to protect the family by covering the event of death of the principal earner, the sum insured should be three to five times the annual salary of the principal earner. Regarding the insurance of the credit card, the amount of the credit can be used as a benchmark. In this case, a risk life insurance with decreasing lump sum might be the best choice.
Scope of coverage:
Are all risks covered? Are there any specific situations (e.g. stays abroad) that are not included in the insurance coverage?
Differences in risk classification:
The providers differ significantly in the classification of the activity and the personal life situation of the insured person. For example, if you are smoker you have to pay a risk premium. The latter is fixed individually by the insurance company.
Life insurances often only cover the risk of death. This would be done, for example, when taking out a mortgage for a real estate purchase. Since life insurances focus on the long term, flexibility is an important factor. As time goes by, the need for a pure risk life insurance might turn into a need for a life insurance with savings portions. Some, but not all providers support an according conversion of the insurance policy without the policyholder losing the premiums paid to date (in form of actuarial capital). Therefore, make sure to check the flexibility of the policy when concluding the contract, i.e. whether a conversion or cash surrender are possible. You can find information on the respective product sites in the life insurance comparison.