What are the main features of life insurance?
Life insurance often consists of highly complex policies which provide policyholders with a combination of wealth-building solutions, pension benefits and risk cover to insure against events such as death or sickness. However, pure risk life insurance and pure endowment insurance are also available.
Risk insurance benefits are paid out if an unforeseen event – such as the policyholder’s occupational disablement – occurs.
In the case of endowment insurance, on the other hand, the event that triggers the payment of benefits is the endowment date following a contractually agreed period.
Endowment insurance policies are therefore used as savings vehicles – mostly as a form of retirement pension – which is why they are sometimes paid out as monthly annuities.
has been head of life customer relationship management at Basler Germany since 2008. She joined Baloise in 2007.Contact
We generally distinguish between traditional and modern life insurance.
Traditional life insurance offers a firmly guaranteed rate of return throughout the term of the policy. Policyholders, for example, might receive an interest rate of 2.5 per cent on their capital over a ten-year period. Given the prevailing low-interest-rate environment, however, these high-yielding life insurance policies are hardly available any more to individuals (individual life insurance). In Switzerland it is more common to see policies that offer a guaranteed return of, say, 0.5 per cent combined with the opportunity for customers to benefit from potential investment gains.
In ➯ group life business there are still insurance policies that offer guaranteed rates of return. One alternative to guaranteed-return policies that has recently become established along with other modern products is the ➯ investment-type policy. Instead of providing a guaranteed return on the capital employed, they offer customers the opportunity to share in the proceeds from investment gains. Customers benefit fully from these investment returns and, depending on the individual product, the protection of their capital is guaranteed, which means that they cannot lose the capital they have invested. These insurance policies are common, for example, in German life business.
Some products, such as group life business, have a profit-sharing agreement with policyholders. This enables the latter to benefit directly from insurers’ investment returns in the form of ➯ policyholder’s dividends.
The level of guaranteed returns varies from product to product. While some products are adjusted annually (e. g. Swiss group life business) or are fixed for a specific period (e. g. individual life), other products offer no guarantees (investment-type policies). Policyholders bear the entire investment risk attaching to products for which no guarantee is provided.