Five common misconceptions about life insurance
27 May 2024 | Comment(s) |
Guillaume Chassot
“Life insurance is only useful in the event of death”, “life insurance is for old people” : misconceptions relating to life insurance can be hard to overcome. While life insurance protects you in the event of death or disability, it has other advantages, such as tax benefits. What's more, it allows you to save and plan for your retirement with peace of mind by taking out a so-called third pillar insurance scheme. Let’s find out more about the advantages of life insurance and any misconceptions that surround it.
1) Life insurance only covers death = FALSE
Of course, it is possible to cover only death benefits. This is known as “pure risk” insurance. However, life insurance can be much more than that. It can be used to save for retirement or any other project (buying a property for example). You can combine these savings with annuities or lump sum amounts in the event of disability, add lump sum amounts in the event of death and, above all, include the waiver of premium option, which allows the insurer to sustain your premium payments in the event of disability.
2) Life insurance does not give policyholders access to the financial markets = FALSE
Today, most life insurance products allow you to invest in attractive investment funds. There is something for everyone. It is even possible to mix guaranteed savings with savings invested in securities. This is what we offer with our VariaInvest product, for example.
3) Life insurance is only interesting for people over-50 = FALSE
It’s quite the opposite: the younger you start, the more attractive it is. By starting to save early, you maximize the opportunities for returns and can expected to receive a higher amount when you retire, thanks in particular to the principle of compound interest. What's more, as well as saving for retirement, you can use the capital amount you save early to buy your own home or to become self-employed, for example.
4) Life insurance offers no flexibility = FALSE
Most products on the market today offer a great deal of flexibility. For example, you can take “breaks” in your premium payments, make additional payments at any time, change the type of pension (3a-3b) to suit your personal situation, and even change the way you invest your savings. Our VariaInvest pension solution is the most flexible because it allows you to change your strategy at any time.
5) Taking out life insurance is a commitment for the rest of my life = FALSE
It is true that, in principle, a life insurance policy is often taken out until retirement age. Firstly, you need to distinguish between the type of pension plan (tied pension provision (3a pillar) or flexible pension provision (3b pillar)). With the flexible 3b pension provision, you can withdraw your assets at any time and for any reason. In the case of tied 3a retirement savings, the main reasons for early withdrawal would include becoming a homeowner, repaying a mortgage debt when buying your own home, becoming self-employed, or leaving Switzerland permanently. It should be noted that it is also possible to stop paying into a life insurance policy at any time.
The other advantages of life insurance
- Life insurance is a tax-efficient option = TRUE
By taking out tied pension provision (3a pillar), you can deduct the amount of your premiums from your taxable income, up to a maximum of CHF 7,056 per year and up to CHF 35,280 for self-employed people (max. 20% of income).
- Life insurance provides financial security for your retirement = TRUE
If you choose to set up a third pillar insurance with life insurance, you will save money every month through the payment of your premiums (amount of your choice). It's a sure way of guaranteeing that you receive an adequate pension when you reach retirement age. What's more, your savings are protected whatever happens. The insurer will pay your premiums if you become unable to work due to illness or accident.
Whatever your life situation, don't hesitate to contact us for personalised advice.
