Life insurance

Life insurance (Lebensversicherung) is the most widespread provision product in Germany – with around 79 million contracts (almost as many as there are inhabitants).

2 basic types:

1. Endowment life insurance (Kapitallebensversicherung):

• Combination of savings contract + death cover
• Guaranteed interest rate for new contracts: only 0.25% (2025)
• Plus profit participation (variable, not guaranteed)
• Criticism: high costs (commission, administration), low return – an ETF has historically delivered 4–5x more

2. Term life insurance (Risikolebensversicherung):

• ONLY death cover – pays an agreed sum on death
• Extremely cheap: from €5–15/month for €200,000 of cover
• Recommended for: families with children, homeowners with a mortgage

Cancelling an endowment policy:

• The surrender value is often 20–40% below the premiums paid in
• Alternative: make it premium-free (no further payments, the contract continues)
• Or: sell it on the secondary market (5–10% more than the surrender value)