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Life insurance – everything you need to know

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Life insurance policies differ from one another based on their investment form and also their modalities regarding pay-out. For example there are the following types of life insurance:

  • Survival and life insurance
  • Risk insurance
  • Pension insurance
  • Fund and index-based life insurance

Prior to concluding a contract

Insurance companies must inform you in detail about the following:

  • Who is the insurance company? – Name, registered office and legal form
  • What law is applicable?
  • Through which channels will the insurance company communicate with you?
  • How can you end the contract? – Cancellation, Withdrawal, Termination
  • Who is the competent body for complaints at your insurance company?
  • Does a guarantee system exist?
  • How must tax do you pay for your insurance?
The interest on classical life insurance consists of two components:

  • guaranteed interest and
  • variable participation in profits

The FMA determines how high the guaranteed interest rate from an insurance company may be allowed to be when concluding the contract.
Information Brochure on Life Insurance
Overview of historic maximum interest rates

During its term

In the case of life insurance and pension insurance, your insurance must send you an annual statement about the value of your insurance. It must state the current surrender value.

  • Life insurance – the statement must include a current forecast for the pay-out amount at the end of the contract.
  • Pension insurance – the statement must include a current forecast about the expected amount of the pension at the end of the contract
A Deckungsstock (cover pool) is formed by the insurance company for survival and life insurance. That means that the capital invested for you must be managed separately from the rest of the assets of the insurance company. In the case of bankruptcy, the Deckungsstock forms a special fund, from which the claims of the insured persons are to be satisfied preferentially. The Deckungsstock should guarantee in the event of bankruptcy that the claims of insured persons are fully covered.
Please remember that insurance tax, the costs of concluding the contract and management fees as well as risk-related costs and possibly also the commission of an agent are deducted from the premium paid in. The remaining amount (savings premium) is invested or has interest paid on it in the form of guaranteed interest.

Do you want to terminate your life insurance policy early?

Life insurance is designed to have a very long term. Early termination contradicts the essence of the product and is associated with losses to your detriment. Termination, particularly during the few first years after conclusion of the contract is particularly disadvantageous for you.

The earlier you terminate the contract, the less you will receive as a pay-out. In the first few years following the conclusion of the contract, redemption may also be associated with losses. When you conclude the contract ask for a surrender value table (specimen calculation), in which you will find both the surrender values as well as the total paid in premium sum for each year.
The earlier you terminate the contract, the less you will receive as a pay-out. In the first few years following the conclusion of the contract, a redemption may also be associated with losses. The surrender value is calculated using current prices or index values. It is not possible to predict in advance how the price will develop. When you conclude the contract ask for a surrender value table (specimen calculation), in which you will find both the surrender values as well as the total paid in premium sum for each year.
Your contract will not be terminated, but instead will be frozen – you will no longer pay any premium, and your credit balance will continue to be invested with the ongoing management costs deducted, and a new sum insured calculated accordingly. The table for premium-fee interest benefits (specimen calculation) contains all the information and totals. Caution: Waiving the premium is probably also associated with costs.

Yield – what can you expect?

The total interest on your life insurance policy consists of the guaranteed interest rate and the interest from the participation in profits.

Your insurance company committed itself when the contract was concluded to a certain benefit in the case of the insured event occurring or at the end of the term of the contract. You receive the savings premium and interest paid out. The savings premium is the premium paid in less tax, management and risk costs.


In addition to the guaranteed sum insured you may also receive a participation in profits. The variable participation in profits is the insurance policyholders participation in the success of the insurance company. The amount of the participation in profits depends on how the capital markets perform, and cannot be guaranteed in advance. Check in the accompanying application documentation for the insurance product about the information on the variable participation in profits.
Instead of an insurance benefit that is defined in advance you receive the current value of the units in the fund (or the index). It is not possible to predict the performance of the fund or index. It is subject to fluctuations and may also be negative. As the insurance policyholder you bear the investment risk. Inform yourself in advance about what proportion of the premium that you pay in is invested in the investment fund.

There may be an external guarantor that takes over the guarantee that amount to be paid out does not fall below a certain amount. However, in the event that the guarantor becomes insolvent during the term, then the guarantee may potentially become void.

Further information