Risk life insurance in Switzerland
Here you’ll find answers to eight key questions on risk life insurance.
31.01.2022
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1. What is meant by risk life insurance?
In Switzerland, the term 'risk life insurance' is used to refer to policies that provide financial protection for the risks of incapacity for work and death. These two types of insurance are referred to as death benefits insurance and income protection insurance. You can take out risk life insurance without a savings element as part of restricted pillar 3a and unrestricted pillar 3b plans.
2. How does risk life insurance work?
Risk life insurance covers events (incapacity for work or death) that occur within the term of the policy. In this sense, it is the equivalent of term life insurance. If the event does not occur within this period, there is no payout.
3. Risk life insurance in the event of death
When do I need risk life insurance to cover death?
In the event of your death, risk life insurance provides financial protection for your surviving dependants. Mortgage loans in particular could otherwise become a burden for them. With risk life insurance, you can also protect your business partners from losses caused by your absence.
What does death benefits insurance cover?
This insurance covers death caused by accident or illness. The benefits differ from one insurer to another, particularly with regard to cover for mental illness and suicide. In the event of death during the term of the policy, the insurance company will pay out a lump sum or provide a regular monthly income.
How to decide whether to choose a decreasing-term or level-term policy
This depends largely on the purpose of the cover. If you want to cover a second mortgage that is to be repaid in full, life insurance with a decreasing lump-sum death benefit is appropriate. If you want the insurance to cover your children's education or the loss of the principal earner's income, a policy with a fixed sum insured is advisable.
If you choose a policy with a decreasing lump-sum death benefit, the premium also becomes gradually cheaper. From a financial perspective, it is therefore sensible to choose a decreasing sum insured whenever possible.
4. Risk life insurance for loss of earnings
When do I need risk life insurance to cover loss of earnings?
If you are unable to work due to illness or accident, income protection insurance, also referred to as loss-of-income insurance or disability insurance, will provide cover.
What cover does risk life insurance provide in the event of incapacity for work?
It helps you maintain your standard of living and prevents you from falling into debt. It is paid out in the form of a regular monthly income. Learn more here in the article on income protection insurance.
5. What should I watch out for with risk life insurance?
Amount of the sum insured: if the purpose of the insurance is to protect family members by covering the event of the principal earner's death, the sum insured should be three to five times the annual salary of the principal earner. If the insurance is taken out to protect loan repayments, the sum insured should be based on the loan amount. In this case, risk life insurance with a decreasing sum insured might be the best choice.
Scope of cover: are all risks covered? Are there any specific situations (e.g. stays abroad) that are not included in the insurance cover?
Differences in risk classification: insurance companies differ significantly in the way they classify the activities and personal circumstances of the insured person in terms of risk. For example, if you are smoker, you have to pay a risk premium, which is set individually by each insurance company.
Flexibility: life insurance often only covers the risk of death. Since life insurance policies are long-term products, flexibility is an important factor. As time goes by, instead of just a straight risk life insurance policy, you may decide you need combined life insurance, which includes a savings element rather like an endowment policy.
Some, but not all, insurers allow you to convert your insurance policy accordingly, without losing the capital you have accumulated to date. Therefore, make sure you check the flexibility of the policy before you take it out, i.e. whether conversion or cash surrender is possible. You can find information about this on the product pages in the Comparis life insurance comparison.
6. Can I borrow against risk insurance?
Yes, depending on the general terms and conditions and any additional conditions, you may be able to pledge or borrow against the insurance policy. Often, life policies are used to protect mortgage repayments.
7. What tax benefits does risk life insurance offer?
You can take out death benefits insurance as part of restricted pillar 3a and unrestricted pillar 3b plans. On your tax return, pillar 3a premium payments can be deducted from the income subject to social insurance contributions.
Risk life insurance in pillar 3a
Pillar 3a is a private, personal pension plan. Unlike the unrestricted pillar 3b pension plan, pillar 3a offers tax benefits. On your tax return, for the purposes of direct federal, cantonal and municipal taxes, you can deduct your contributions to the restricted pension plan, up to a statutory maximum amount, from the income subject to social insurance contributions.
The ordinance on tax relief on contributions to recognized pension schemes (BVV/OPP 3) (in German, French and Italian only) stipulates who can be designated as a beneficiary. Possible beneficiaries are firstly the spouse or registered partner, followed by the direct descendants (or persons treated as such, e.g. civil partners). After that, you can determine the order of the other legal heirs (parents, siblings, other heirs).
The payout is taxed at a reduced rate, which varies by canton.
Risk life insurance in pillar 3b
With pillar 3b , you can deduct insurance premiums from your taxable income at a flat rate. What’s more, the pension capital can be accessed at short notice if need be.
8. How to proceed in the case of death when risk life insurance is available
Notify the insurance company of the death immediately.
Obtain the policy or policies.
Which benefits are insured?
Which documents does the insurer need in order to be able to pay out the insured benefits?
Send claims by registered post, stating the policy number or membership number. Make sure you 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.
You can claim back any premiums paid in advance.
Contact the treating doctor. If they cannot be reached, contact your GP/family doctor. If they cannot be reached either, contact the emergency doctor. The doctor will determine the cause of death and issue the death certificate.
The hospital, clinic or home administration takes care of the necessary formalities and has the death certificate issued.
Call the police to investigate the cause of the accident. This applies to all accidents (road traffic, occupational, domestic and other accidents).