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Term life insurance is worth the money

E.A term life insurance is one of the simplest, clearest and cheapest insurance. If the insured person dies during the term of the contract, the beneficiary receives a fixed amount, for example 100,000 euros. There are three questions to be answered: Is the insurance necessary? In what amount and with what duration?

First case: single, single, no children. Doesn’t need insurance. When he dies, and that shouldn’t sound heartless, nobody usually falls into financial crisis. Second case: married or in partnership, no children. Insurance makes sense if a real estate loan is being paid off together that cannot be borne by one person alone. Attention: If you are not married, you have to pay inheritance tax on the payment. The tax exemption is only 20,000 euros, whereas for married people it is 500,000 euros. Cross-over life insurance is a solution to avoid inheritance tax. Third case: scenarios with young children. Insurance makes perfect sense. If one of the parents dies, there is no family income and a carer for the children.

The younger, the cheaper

The duration of the contracts should be based on how long a real estate loan is still running and how long the children are likely to need financial support. The amount of insurance should be based on income. A fixed sum is simpler and clearer than variable amounts. Three to five annual salaries for the insured are a good rule of thumb. In general, the younger you are when you sign up and the shorter the contract, the cheaper it is.

Those who take out a contract with 30 over 100,000 euros for 25 years currently pay around 50 euros a year. Those who only do this at the age of 40 end up at around 130 euros and at 50 already at 400 euros. An unfavorable health check can also make insurance significantly more expensive. Before signing a contract, it should be checked whether other insurances such as occupational disability insurance already include death protection and whether this is sufficient.

Do you have any questions about money?

Gladly to our editor Daniel Mohr at fragdenmohr@faz.de

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