Consumer advocates advise
Which life insurance policies you should not cancel
Updated on November 8, 2024 – 2:02 p.mReading time: 2 minutes
Switching to a new contract can make sense with some insurance companies. However, this is often not the case with life insurance.
Has your life insurer ever tried to convince you to exchange your old contract for a new one? It’s better not to rush into this, advises the North Rhine-Westphalia consumer advice center. The reason: Switching to a different contract is often good business, especially for insurers.
According to the consumer advice center, taking out new life insurance policies is no longer appropriate given the low interest rates and high costs. Older contracts, especially those concluded before 2004, often still offer guaranteed interest rates of between three and four percent. Anyone who abandons these contracts and concludes a new contract with a lower or no guarantee could end up doing a bad deal.
In addition, for contracts that were concluded before 2005 and run for longer than twelve years, the payout is often tax-free. Insured persons should therefore check their insurance documents to determine which option is more advantageous for them. If you lose track of things, you can get support from a consumer advice center.
By the way: Even if you find the premiums for life insurance too much or you find them unprofitable, termination is not always the best option. According to the North Rhine-Westphalia Consumer Center, it may be better, for example, to just apply for insurance premium exemption. Then the savings remain in the contract, but monthly contributions no longer have to be made.
If you urgently need the money from the insurance, you may be able to sell the policy on the secondary market. Under certain circumstances, this can result in higher proceeds than the insurer’s surrender value upon termination.
In some cases, insured people can even make use of their right of withdrawal – even years after conclusion or payment. This is the case, for example, if insurers did not provide any or only insufficient information about the right of withdrawal and objection when the contract was concluded. This can also increase revenue significantly because the contract is completely reversed.
