Surpluses in life insurance are falling: savers need to know that

Thursday, 08.12.16, written by Bernd Lauberg

If you have a classic life insurance policy, the return depends above all on the so-called surpluses. But many insurers need to continue to reduce their current interest rates in light of the persistently low interest rates. In addition to Allianz, AXA, DBV, ERGO and other providers have also cut their 2017 surpluses. What does this mean for insured persons?

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Allianz und Co. senken Überschüsse: Lebensversicherung im Sinkflug
Falling interest rates: This is how customers bring their money to the dry

Surpluses in life insurance will probably be cut across the industry in 2017. Following AXA, DBV, Stuttgarter, ERGO Direkt, ERGO (including old Victoria contracts), Nürnberger and Alte Leipziger, Allianz Lebensversicherung has now confirmed a reduction in current interest . For a total of 0.3 percentage points, Allianz’s 2017 bonus is lower. Instead of an interest rate of 3.1 percent, there will only be 2.8 percent in the coming year for classic life insurance. By contrast, the base amount for participation in valuation reserves remains unchanged at 0.6 percent, resulting in a total return of 3.4 percent . Perspectives reduce interest rates to 2.9 percent and 3.7 percent, respectively.

What do falling surpluses mean for customers with life insurance?

For customers of Allianz and other life insurers, the trend of recent years continues: Instead of high interest rates, there are gradually lower yields . While 0.3 percentage points initially sound inexperienced to the layman, even a small reduction in interest rates has a significant impact on the expected return at the end of the contract. Above all, savers who have concluded their contract only a few years ago and are still facing a long term, will feel this. Because not only does a portion of the expected returns be missing every year. The lower compound interest effect reinforces the effect of falling interest rates with each current year.

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What can savers do now?

If the returns of life insurance are no longer satisfactory, the termination is often not recommended . For the so-called repurchase value, ie the money that the insurance pays out in such a case, is usually lower than the contributions paid so far, especially for relatively new contracts. As an alternative, a life insurance can be provided free of charge . Then no contributions will be paid in, but the assets saved so far will continue to earn interest.

Is it still worthwhile to conclude a classic life insurance?

Anyone who wants to take out life insurance today at a young age rarely gets the recommendation of experts to bet on the classic variant. Insurers are increasingly withdrawing from classic life insurance business due to declining earnings. In addition, the guaranteed interest rate is lowered further. As of 1 January 2017, it is only 0.9 percent instead of 1.25 percent. For these reasons, many new customers are now more confident in unit-linked life insurance . However, in contrast to the classic version, this is associated with risks, which makes stronger advice necessary.

Here you will find tips and more information about life insurance.