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Once a year, some financial mathematicians gather in Cologne to see if life insurance is still worthwhile. They work for the rating agency Assekurata, ask more than 80 insurers - and then get data and answers from more than 50 of them. After all.
This is also interesting for the millions of Germans who own one or more life insurance policies. Looking into the annual stand message was recently frustrating. For 20 years, the return on life insurance has been falling more or less continuously - and thus the returns on insurance contracts. Because of the worries that some society might no longer be able to live up to their promises of promises, the German government condemned insurers years ago for extra money.
But this year the financial mathematicians of the Assekurata read a calming message from the numbers: It has not got worse again. In particular, it contributed to the fact that the Bundestag did a great favor to the insurers: in October it relaxed the conditions for the formation of these long-term reserves.
The payment
That means we would be in the numbers: on average, the invested money of savers in the examined life and annuity insurance in 2019 with 2.84 percent interest. With the newer contracts there are still current interest rates of a good 2.4 percent.
What does that mean for you as the owner of such a contract? First of all, the average numbers do not say much for you. It depends on what type of contract you bought years or decades ago. And at which provider you have completed.
The best ones are the customers who signed a new contract between 1994 and 2000. At that time, the providers have actually contractually promised four percent return on the savings. That means for every euro that is on the insurance account today after 20 years, there are four percent interest every year. Even if you subtract the costs of the contracts, returns remain well in excess of three percent.
Normally, insurers do not generate four percent. On average, it is just just over 2.8 percent. This means insurers have to spend extra money on such four-percent contracts to meet their contractual obligations.
The same applies to contracts from 1987 to 1995 , at that time 3.5 percent return on savings was guaranteed. And for contracts from 2001 to 2004. Since insurers have guaranteed 3.25 percent.
Those who have concluded contracts from 2005 to 2007 are then guaranteed 2.75 percent - a return which many insurers currently do not generate.
So who has such an old contract, should continue until the scheduled expiration. Because safe interest rates at this level are currently not available on the market.
Actual return
The question of how high the return on paid contributions actually is also differs considerably from insurer to insurer. The effects on the past analysis of the Assekurata can be seen particularly impressively.
- The return on a classic life insurance policy at Debeka is actually more than five percent after 30 years.
- In Europe , the return is just under five percent.
- At HDI Leben , Axa Leben and Deutsche Ärzteversicherung , the comparable return is just over three percent.
If one calculates with 1200 Euro deposit in the year over 30 years, stand at just over three percent at the end almost 60,000 euros in the account (58,800 for 3 percent). At just over five percent would be 85,000 euros (83,700 euros at 5 percent). A considerable difference.
Current contracts
Such developments can only make younger customers who spend their money today dream. And good past values also do not guarantee the quality of current offers and the development in the future.
That's easy to see in the later contracts. The officially stated interest rate is still higher than two percent. However, taking into account the costs incurred for sales and administration, the returns are small. And the returns are certainly not guaranteed. Taking only the current guarantees of 0.9 percent as a benchmark and taking into account all costs, on average over 20 years the companies remain just 0.14 percent guaranteed return. That's not worth it.
Contracts that ran from 2006 to 2018, in the worse case, resulted in returns of less than one percent for Axa Leben and HDI Leben. For Europe and Debeka, yields are at least beyond three percent.
Special case Riester
Things look a little better for Riester customers. Their return comes primarily from the promotion. Assekurata points out in his 150-page study that the - not guaranteed - a good two percent return on new classic life insurance is still better than many other secure investments. If, for example, you give your money for a government bond of the Federal Republic of Germany - and you set it for the next 30 years - then you only get 0.77 percent interest.
But the insurers are too expensive, of the two percent is often left only half. And over the past 20 to 30 years, investing in equity index funds has been fairly safe in the past. And they brought much higher returns.
So what follows for you?
- Stick to old life insurance and pension insurance contracts. And look forward to receiving the right contract at the time.
- If you have to change the contract due to financial hardships, you must first make the old contract non-contributory. If the problem is short-term, lend a contract in case of doubt. If the problem becomes huge, check the sale of your life insurance. Economically advantageous is an early termination of such an old contract in the fewest cases.
- You should not sign up for a new life or pension insurance under the heading Investment. If you want to use the support for Riester contracts for your retirement, you can conclude one of the better contracts.
- If at the end of the term less than 10,000 euros on the contract are on it (you get less than 30 euros pension a month), you can have the Riester contract paid out in one fell swoop. Best in the second year of your pension, because the deposit in your Riester contract was tax-free, which is why you have to pay tax on the Riester pension, if only with a reduced tax rate.
Such insurance is something for quiet people. The strenght is to be found in serenity.
I wish you success.