The classic life insurance has lost a lot of its attractiveness due to the extremely low interest rates. Nevertheless, many people still take out life insurance as a provision for life in old age. Insurance advisors continue to advertise the insurance’s additional benefits, and the so-called surplus participation in particular plays an important role alongside the tax advantages. The advisors are happy to conceal the fact that not a small part of the commission and costs for the contract go away from the contributions.
The expensive commissions
The life insurers complain that the profit sharing is melting away . But life insurance was already expensive when insurance companies could no longer keep their interest promises. One cost factor is the commissions that the insurance consultant receives for his work. This sum amounts to between three and five percent, which is calculated according to the customer’s annual contribution and multiplied by the term of the life insurance. An example shows how much the commission reduces the sum of the life insurance:
- A customer pays 150 euros into his life insurance every month. The term of the insurance is 30 years, so the premium is 54,000 euros. With a commission of five percent, 2700 euros have gone to the insurance broker since the start of the contract. However, the broker must repay the commission proportionately if the customer cancels his contract within the first five years. In addition, the insurance advisor receives a so-called support commission, which makes up around one percent of the annual premium. In this example, that is another 18 euros per year, over the entire term of 30 years. In this way, the broker receives a sum between 1638 euros and 2718 euros.
The sales and acquisition costs
The sales and acquisition costs are also among the items that make up the profit reduce a life insurance policy. How expensive the acquisition costs for the policies are always depends on the conditions of the respective insurance company. The numbers usually fluctuate between a cheap 2.2 percent and an expensive 7.5 percent of the premium amount. The insurer must disclose how high the costs actually are in the policy or on a separate sheet. Unfortunately, the insurers are not obliged to indicate the individual items. So the customer does not find out how much he has to pay for administration, for the development of a product and the group profit. While the insurance companies used to deduct the contract costs directly at the beginning of the contract term, the insurance company now deducts the costs proportionately in the first five years of the term. The costs for the sales and acquisition costs are between 1188 euros and 4050 euros.
Ongoing contract costs, the death protection case and the fund costs
Another way to collect, have the insurer in the fee for the administration of the contract. Here, too, the costs vary considerably depending on the insurer. On average, however, the customer has to reckon with five percent. According to a recent ruling by the Federal Court of Justice, insurance companies are no longer allowed to withhold the costs of ongoing contract costs in full if the customer cancels the life insurance. For everyone who chooses life insurance with a fund component, they have to pay around one percent of the fund performance in the form of a fee. However, the fee only reduces the profits from the fund investment; nothing changes in the amount of the contribution amount. If you want to take out life insurance, you should be aware that this insurance is primarily intended as a risk protection and not as a savings product. The survivor protection , which makes up around ten percent, is a good example of this. Here the insurance company asks the customer to pay around 5400 euros.
Only a small profit sharing
It is not just the costs that make life insurance unattractive as an investment product. The actual profit sharing is also well below the values with which insurance companies like to advertise. If things get really bad, the insurer can reduce all surpluses except for the interest rate that the insurance company guaranteed when the contract was signed. For new customers, this maximum interest rate is currently only 0.9 percent. Some insurers even undercut this maximum, they only offer their customers between 0.2 and 0.75 percent.
If you want to take out life insurance, you should pay particular attention to the “additional costs” respect, think highly of. Direct insurance on the Internet is currently offering good offers with significantly better conditions. You have fewer administrative costs and can therefore make attractive offers to your customers.
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