Life insurance payout Less than expected – what to do?Insurance Payouts
Saved for a long time, money is finally flowing. But many customers are disappointed when they look at their final statement after years of saving. The financial experts at our blog explain why the payout is often far below the forecast of the past – and when it is worthwhile for customers to check their life insurance.
When the “possible” final surplus continues to fall
Our team blog has been paying into an endowment insurance policy for 29 years. But he is not satisfied with the amount paid out; it is less than predicted. When he took out the policy in 1988, the now 61-year-old received a good guaranteed interest rate of 3.5 percent – in other words, a good interest rate on his savings deposits after deduction of costs. Today there is only 0.9 percent for new contracts.
But the “possible” final surplus, which he had promised in earlier stand announcements, fell by several thousand dollars during the course of the contract – down to zero at the end of the contract. Just like our team blog, many customers are disappointed when they look at their final statement after years of saving.
- Current contract. If you already have a contract, stick to it. If it runs for more than five years, the acquisition costs are usually paid and more of your premium goes into your savings account.
- Payout. If your contract has expired and the insurer does not inform you of your participation in the valuation reserves, ask for clarification.
- Appeal. If the insurer does not inform you, contact the ombudsman and the Federal Financial Supervisory Authority. They will check, for example, whether the time of participation in reserves is correct.
- Contract review. You can have your contract checked by the consumer advice centre in Hamburg. This costs $85. Among other things, it checks whether the return on investment is plausible.
- Lawsuit. If your complaint is unsuccessful and you have legal protection insurance, sue your insurer.. Even if the Bafin sees “no indications” of a miscalculation after a complaint, this “does not prevent the plaintiff from claiming a right to a review in civil proceedings”, according to our blog experts.
- New contract. Do not take out an endowment life insurance policy and none of the newly offered private pension insurance policies with lowered guarantees for old-age provision. You will not find out how much of the premium is really saved. In addition, the benefit guaranteed at the time the contract is concluded is too low.
Build only on warranty
Life insurance is a complicated form of investment. In original calculations and annual notifications, an insurer provides information about a possible payout sum. It is made up of several parts: the guaranteed benefit, the profit participation and possibly final surpluses and valuation reserves.
Life insurance payout: How the sum is made up. A customer pays into a life insurance policy for many years. In the end, he will certainly only receive his guaranteed benefit, i.e. interest-bearing savings deposits minus costs. Whether there is more depends on how successfully the insurer manages the money of all customers and how it participates.
Every stand message looks different
Customers often cannot see at a glance which components are safe and what they are entitled to. What’s more, every stand message looks different, and by no means everywhere are all parts individually itemised. Surpluses are uncertain in any case. This applies to endowment insurance as well as to private pension insurance.
Dispute over participation in valuation reserves
In addition to disappointment over low profit participation, there is also a dispute between insurers and customers over participation in the valuation reserves. They arise when the market value of an insurer’s investment is higher than the acquisition price – in other words, when the value of real estate, equity investments or interest-bearing securities acquired with the client’s money has risen.
Final surplus “for compensation” deleted
Our team blog is doubly affected: He received less profit participation and his share of the valuation reserves were reduced by 10 percent. Background: Insurers always keep an eye on the total portfolio of all their customers. This is also the case with our team blog’s provincial government.
The company had set the current interest rate, i.e. the sum of guaranteed interest and interest profit share, for the average of all contracts for the year 2017 – Our team’s contract end date – at 2.25 percent.
Also in the years prior to this, he is guaranteed an interest rate of 3.5 percent was better than the current interest rate set by the insurer. The bitter consequence for him Because his guarantee was higher, the authority cut the final surplus and reduced his participation in the valuation reserves “for compensation”, according to their succinct explanation. The company made these cuts in order to fulfill its guarantee commitments to existing customers.
A further annoyance is the lack of transparency right up to the end: The insurer does not break down how much of the respective surplus source flows to the individual customer. The annual report provides information on this for all customers. But it does not understand “no normal customer”, says insurance expert Hermann Weinmann ( interview).
Many from our blog readers are not satisfied with their share of the valuation reserves and the information provided by the insurer about them.
Help from the Federal Supreme Court
Customers repeatedly ask insurers about their participation in the valuation reserves. Our team blog also turned to the insurance supervisory authority. In his case this was in vain, but other customers were successful there. In the meantime, the dispute between declared the reduction of the valuation reserves from fixed-interest securities, which has been in effect since 2014, to be legal.
However, the defendant insurance company has to justify why it is cutting the payout and why the customer is getting less valuation reserves. This ruling is a good lever for customers to demand a transparent and comprehensible final statement from the insurer.