Term life insurance can be a useful instrument with which to safeguard your financial life. But because life insurance is a longer-term commitment, it is important to consider a few important criteria before taking out a policy.
- Taking out term life insurance normally only makes sense if you have dependents which rely on you for financial support. Carefully consider how your death would impact the financial well-being of your spouse, children or even your business or charitable causes which you care about. For example, if you expect to take on a large amount of debt or mortgage a home, a life insurance benefit could help your family to pay off the debt in the sad event that you pass away before the loan is repaid.
- Sum insured: In Switzerland, term life policies are offered in both constant-benefit and decreasing-benefit varieties. Decreasing-benefit policies are much more affordable because the benefit decreases at a fixed rate every year of the insurance term. This type of term life insurance is sometimes referred to as mortgage life insurance because it is particularly well-suited to individuals who are taking on a large amount of debt which will be amortized at a steady rate over the loan term. The decline in the benefit decreases in keeping with the amortization of the loan, so that you only pay for the coverage necessary to safeguard repayment of the loan. Constant benefit term life insurance, on the other hand, delivers a fixed benefit throughout the entire insurance term. This is useful if you want to leave a large benefit (as a legacy, for example) to dependents or if you have an open-ended loan or non-amortizing mortgage which must be paid off in the event of your death. Read the guide to constant-benefit vs. decreasing-benefit life insurance for more information.
- Waiver of premium coverage: Some life insurance policies include a premium payment insurance. This insurance covers all or part of your life insurance premiums – normally for a predetermined length of time – in the event of your becoming unemployed or disabled. This prevents your losing your life insurance coverage if you cannot afford to pay premiums at some point within the insurance term. Some policies include this coverage by default, but it normally comes as an optional rider at an added premium. If you have any concerns about being unable to meet your premium payments in the future, taking out this coverage along with you term life policy can make sense.
- Third pillar: In Switzerland, term life insurance policies are based on the 3a or 3b categories of retirement savings. Premiums paid for 3a policies are tax deductible (annual limits apply), but your choice of beneficiary is limited by Swiss inheritance rules. Premiums paid for 3b policies are not tax deductible, but you can choose any person or entity as your beneficiary. Find more information in the guide to 3a vs. 3b term life insurance.
- Mixed life insurance: In Switzerland, permanent life insurance is often referred to as mixed life insurance because it combines life insurance coverage with a savings solution (equity in the insurance policy which can be paid out as a benefit). Using permanent life insurance as a combined life insurance and savings solution is generally less financially beneficial than getting a term life insurance policy and opening savings accounts separately because you pay high administrative fees on top of the actual life insurance premiums and savings contributions. Find more information in the guide to mixed life insurance vs. term life insurance.
- Compare: There are major differences in the premiums charged for term life insurance policies from different insurance providers. Because even small differences in premiums can add up to significant amounts of money over long insurance terms, you can save a lot of money by finding the most affordable coverage for your specific needs. The precise, unbiased Swiss life insurance comparison by moneyland.ch makes it easy to find the right term life insurance at the best price.