The most important focus points in a row
What to look for when you want to take out a Life insurance? You’ll probably first want to see how much the premium is; how much you pay per month or per year for insurance? Anyone can look up or (have someone) calculate a premium. You will see that at different insurers the premiums are sometimes very similar to each other. Which insurer should you choose? That’s why it is always wise to know and also compare the conditions. Here the main features of life insurance are described and we will give you tips on what further to pay attention to.
Waiver of premium
Normally, you pay premium for the duration of the life insurance. Some providers offer, in the event of a declining life insurance (annuity or linear), an exemption from the premium in the last five years. Especially for a short duration, this can be an important condition.
En bloc clause
There is also an en-bloc clause included in the terms of a number of insurers. This means that the insurer has the right to increase the premium in the interim. According to most conditions, this can only come into play if there are compelling circumstances, such as an impending bankruptcy of the insurer. This clause does provide some degree of uncertainty about the level of the premium throughout the term.
The risk to the insurer that the life insurance really must come to benefit, increases during the term of the life insurance. However, the premium you pay, often remains the same during the entire term. In the beginning (low mortality) you actually pay too much premium and at the end (high mortality) too little. With a number of suppliers the excess premium that you pay in the beginning is put aside. When you terminate the life insurance prematurely, the accrued value is paid to you.
Constant premium or not?
Most life insurance policies which are taken out in the Netherlands are based on a premium that remains the same from the start to the end date of the life insurance. It is also possible to pay a premium that depends on your age. From the moment you take the life insurance, the premium goes up every year. This is a life insurance on the basis of so-called “one-year risk rates.” If there is a high probability that you will terminate the life insurance in the short term, this may be an interesting option.
Constant or decreasing coverage?
Depending on the purpose of insurance and your wishes regarding the distribution, you can choose constant or decreasing coverage form. If an insurance of €100,000 has constant coverage, then your relatives get paid exactly that sum if you die within the term of the insurance. If the insurance coverage is decreasing, the amount payable decreases in the course of time. This is, for example, interesting if the distribution is parallel to an ever declining mortgage debt..
There are two ways in which the coverage may decrease. In alineardecreasing coverage, the coverage of an insurance policy of €300,000 with a maturity of 30 years, each year decreases by €10,000 (1/30 of €300,000). If you opt for anannuitydecreasing coverage, the insured amount decreases in the same way as an annuity mortgage. Did the mortgage debt decrease during the term to half the original amount? Then the coverage of the life insurance is also about half of the original sum insured.
If you take out a mortgage, it may be that the bank makes demands on the rate at which the decreasing annuity insurance is based. An annuity rate of 6% is parallel to a mortgage debt on which the interest rate would be 6%. When you choose a higher rate than the mortgage interest rate, the coverage of the insurance decreases slightly slower than the mortgage debt. Often the extra premium is low for this.
If you sign up for life insurance because you’re taking on a mortgage, it’s important to make sure whether you are entitled to preliminary coverage. With the purchase of a home you enter into a big commitment, which you may not be able to fulfil if you should die before you are actually the owner. In a preliminary coverage the insurer pays out even if you die in the time between the acceptance and the effective date of the policy. Apart from the question of whether you are entitled to temporary coverage, it is also important to note the following:
- How much are you entitled to with Preliminary Coverage?
- When does your right to Preliminary Coverage start?
- Does getting Preliminary Coverage depend on your age?
- Is there only Preliminary Coverage if you die by accident or is there coverage in any case?
Two insured people
One or two policies?
If you want to have insurance that pays out if one of you dies, you can take out an insurance policy on one or two policies. Which option offers the lowest premiums depends on your situation and the insurer. There will be some differences in the conditions.
- If you choose to take out a single policy, the insurance ends when one of you is deceased. This can be annoying if you wanted to continue insurance after the death of your partner, for example for the children. It is possible to take out a new insurance, but the premiums thereof depends on your age and will therefore probably be higher. In addition, your health may have deteriorated, making getting a new insurance policy more difficult or more expensive.
- With most providers both of you must be insured for the same amount if you take out one policy together.
- If you take out two policies, the insured amount can be paid out twice. If you share a life insurance on one policy, there will be only one return of the sum insured (if one of the two dies) and thereafter the insurance stops.
Taking out crosswise
One important tip if you are a couple, is to pay the premium for each other. So you pay the insurance on the life of your partner and vice versa. You thus avoid having to pay inheritance tax on the benefit. If you pay for and take out the insurance on the life of your spouse, you are entitled to any benefits. If your partner takes out and pays the insurance himself than the benefit falls within the estate and you have to pay inheritance tax on it.
Pay attention! The desired construction must fit how you and your partner have arranged everything, for example in the prenuptial agreement.
Fill out digitally
At more and moreinsurance companies the application can be submitted digitally. We ensure that your application is submitted to the selected insurer. After this you will receive your declaration of health in a secure online environment. This is where you answer questions about your health and medical history. It’s possible that following your completed health declaration, additional information may be requested..
Depending on the amount you wish to insure, the insurer may require, in addition to the health statement to be completed by you, that an inspection take place. The higher the amount you want to insure, the more extensive the requiredinspectionwill be. From an insured amount of €350,000, a number of insurers mandate an additional inspection. Sometimes the border is higher, for example at €500,000.
One insurer will charge fees if you make changes to your insurance, another insurer does not. These include changes in policy, adjusting the duration or insurance coverage, or a change of address.
There may be other, very diverse differences in the terms of insurers. Some examples:
- The age until which you can take out the insurance
- The age until which the insurance may continue
- Do you have a residence permit for a fixed period? Then you can not go to a number of insurers.
- Fixed annual fee and low monthly premium or only a monthly premium?