Life Insurance

How attractive are index policies?

Life insurances are in a difficult position these days. The zero interest rate policy of the European Central Bank makes life insurance increasingly unattractive, because there will be no more than a guaranteed sum at the end of the term. Lush returns such as the one ten years ago are a thing of the past. In order not to slip completely into insignificance, the insurance companies had to come up with something and the result of the considerations is: index policies, a turbo among life insurance companies.

The new investment is called the stock market

The returns are shrinking because the insurance companies invest their customers’ money in government bonds in order to be able to generate the guaranteed interest at all. Now it looks like a trend reversal in the life insurance market. If this trend prevails, then the insured can use the participation feature next year and participate in an index on the stock market. The insurance companies hope that this will wash more money back into the empty coffers. The risks and opportunities are always limited and the customer only has the opportunity to participate in the profits within a certain limit. On the other hand, the entire return from the previous year can be lost. But there is still another danger, because if things don’t work out so well on the bond market, then the original bonus will also drop well below the guaranteed interest rate.

There will be more and more

There are now 17 insurance companies that have indexed policies in their program, but new companies are added practically every month. Customers are obviously also enthusiastic about it, as reported by Allianz, which also offers index policies with “IndexSelect”. Every seventh new customer now chooses this option for their life insurance. But is it really worth investing in this new form of life insurance? Unfortunately, there is no general answer to this question because the differences between the individual insurance companies are too great. Some of the contracts turn out to be inflexible, others promise a very high return if the customer opts for life insurance with a very long term.

If you opt for index policies, you should choose a provider that focuses on the classic stock indices and thus creates a reasonable basis for a good return. These providers are based on the one hand on the DAX, i.e. on the German share index, and on the 30 largest German stock corporations.

Image: © / BrianAJackson

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