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news Millions of BGH verdict on life insurance Tuesday, 10.02.15 , written by Bernd Lauberg The Federal Court of Justice (BGH) has to answer in a recent judgment the question of how much money life insurance customers are entitled to. According to consumer advocates they are not sufficiently involved in the valuation reserves. For the individual, it is about hundreds to thousands of euros – for the insurance industry, it is a billion decision. > Life insurance: BGH checks calculation of reserves

The current judgment of the BGH deals with the hidden reserves in life insurance. In addition to the paid-in contributions and the normal profit sharing, insured persons also receive an interest in these so-called valuation reserves at the end of the contract. Insurers are obliged to – if the contract does not explicitly regulate otherwise – to include the policyholder at the half of the valuation reserves at the end of the contract. The ruling of the BGH, which is expected on Wednesday, should clarify whether the calculation – and thus participation – of the hidden reserves is appropriate or the customers are paid too little money .

Life insurance: BGH decides on additional payment

In the present case, the plaintiff had taken out a life insurance policy with Allianz in 1987 and received a total of EUR 28 026 at the end of the contract in 2008. Of this amount, € 9,124 was accounted for by the surplus participation, including the participation in the valuation reserves. According to the plaintiff, the 657 euro are too little, because the valuation reserves were inadmissibly offset with the final profit participation . (Az. IV ZR 213/14)

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Consumer advocates demand more transparency

Consumer advocates such as the Confederation of Insured eV have been complaining for years that insurers would artificially low their participation in the valuation reserves for consumers through this and similar offsetting. In addition, it is not transparent for the insured how the corresponding calculations are made .

BGH judgment could cost life insurance billions

So far, the action in the lower courts had no success, so that the process has now landed in revision before the Federal Court. Thus, the upcoming judgment has signal effect for the whole industry . If the judges in Karlsruhe decide on the plaintiff, the entire insurance industry faces additional claims from life insurance customers whose contracts were concluded before 2008. In view of a total of more than 87 million life insurance policies in Germany , this is billions of euros for insurance customers and companies .

Update February 11, 2015: The judges have decided against the plaintiff's opinion. Therefore, the alliance does not have to pay any more money or explain exactly how the payment is made. For the BdV "the verdict is a slap in the face." The association criticizes that insured persons must continue to rely on the statements of the companies without a possibility of control. Since there was no consumer protection-hoped for a fundamental verdict, the industry is spared a billion-dollar verdict.

What are hidden reserves?

The hidden reserves represent the difference between the acquisition cost and the current market value of the investments in which life insurance was invested.

BGH judgment: life insurance and Co. soon more transparent?

Even more important than the question of how much money customers are entitled to a life insurance policy is, moreover, the answer to the question as to whether the insurance companies should be required to provide information regarding the actuarial basis for surplus calculation. Insurance customers could then better understand in the future, as the insurer has calculated the amount of hidden reserves. Axel Kleinlein, CEO of the Association of Insured (BdV) evaluated in the run-up to such a decision as an "important step against the steady deterioration of the consumer position."

Just last year, the LVRG passed a new regulation on participation in valuation reserves. The BdV asked the Federal President even the law due to "constitutional concerns" not to sign .

Here you will find tips and more information about life insurance. >

Bernd Lauberg

editorial staff

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Funeral insurance

Death benefit insurance protects your loved ones from the high costs that will be incurred in the event of your death and at the same time ensures you a dignified burial. So neither you nor your partner or your children have to compromise. Because burials are becoming increasingly expensive in Germany.

The history of the statutory death grant

The death benefit was originally a benefit of the statutory health insurance. For example, until the end of 2003, the death benefit was paid on the death of a statutory health insurance in order to bear part of the funeral costs. Most recently, the death benefit amounted to € 525 for legally insured persons and € 262.50 for family members. But at this time, the death benefit had already been cut several times, in 1998, the respective health insurance paid up to 3,100 euros. However, this form of financial support is no longer available. The funeral costs must be so denied from the inheritance of the deceased. If necessary, the relatives also pay for the costs incurred.

How much is a funeral?

The cost of a funeral in Germany depends on the nature of the funeral, whether it is, for example, a burial in the coffin or an urn, location and design of the funeral. On average, in the event of death by burial and all related services, such as transfer or grave planting, costs amounting to 7,000 to 8,000 euros. The exact costs incurred in the death are underestimated by many people who have never had to worry about the funeral of a loved one. After all, not only the casket or the urn must be paid for burial. The grave or urn place costs money, as well as a tombstone, the funeral or the later grave care by the cemetery gardener.
 

This is how a death benefit insurance works

Who wants to have a dignified burial, can not help but to ask the question of how the costs incurred should be denied. After the abolishment of the statutory death benefit, the private death benefit insurance offers the possibility for precaution. As a rule, the insured pays a monthly contribution to the insurance. In the event of death, the latter will pay a pre-agreed sum insured to the beneficiaries (eg spouse or children) who can use this money to pay for the burial costs.
 
The amount of the insurance premiums depends on the age of the insured person at the start of the insurance, any pre-existing illnesses and the amount of the insured sum. Often a limited contribution payment is also agreed. In particular, younger insured pay for some tariffs only up to the age of 65 years so as to make provision for the funeral. If one agrees here with the insurer a longer contribution payment, accordingly the monthly premiums decrease. Alternatively, the mortality provision can also be financed by means of a one-time contribution.
 

 

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Advantage of the death benefit insurance

The capital accumulated in the death benefit insurance belongs to so-called “guardianship”. This means that income diminishes in old age as a result of retirement, the death benefit insurance does not have to be terminated and capital must be used for livelihood if social benefits are applied for. This is one of the big advantages of the death benefit insurance. Alternatively, if you put the money aside and pay it, for example, into a savings account, capital must be used up before any social benefits are paid.
 
Even people with a middle to good income should not neglect this factor. If you are dependent on nursing care when you are old, the costs for this can quickly exceed your own pension and social benefits become necessary. With a private funeral insurance you secure yourself in this case, a dignified burial.
 

Is a death benefit insurance useful?

The death benefit insurance is useful if the funeral costs can not be easily paid from the estate and their own relatives should not be additionally financially burdened in the event of death. However, anyone interested in a death benefit insurance should check in advance whether, in the event of a case, a death benefit is not already paid by the employer.
 
For example, the dependents of civil servants (also retired) receive a death benefit under the Public Servants Act. This includes twice the last salary or pension. The official death grant is usually sufficient to cover at least the majority of funeral expenses. Sometimes the employer also pays a death grant for employees. This is then regulated in the employment or collective agreement. In addition, there may be a death benefit from the company pension scheme.
 
In the cases mentioned, a death benefit insurance usually makes less sense, since the financial burdens are already covered by a funeral with the services of the employer, employer or company pension.
 
Anyone who is already older and now deals more intensively with the topic of death, should check before concluding a death benefit insurance, whether a monthly payment method or the death benefit provision recommended by a lump sum. For example, people aged 50-65 will be more likely to pay once, otherwise the monthly contributions will be too high.
 

Termination of Death Benefit Insurance?

A death benefit insurance can be terminated like any other endowment insurance. The deadline for this depends on the payment method (monthly, quarterly, yearly) and amounts to one month after payment of the last installment. Upon termination, the insured person will be refunded the current surrender value by the provider. However, as usually administrative costs and fees due at the beginning of the insurance period are covered by the contributions, the repurchase value is very small compared to the contributions initially paid.
 
There is also the option to post the insurance without deduction if a specified minimum value has been reached. In this case, the insurance continues to run without paying contributions. In the event of death, however, a lesser amount will be paid to the surviving dependents.

Editorial tip: deduct contributions to the death benefit insurance

Depending on the nature of the death benefit insurance, the insurance premiums in the tax return can be deducted as special expenses for tax purposes. This is possible under the heading “Investment in pension costs: other miscellaneous pension costs”

Death benefits insurance and taxes – When is the death benefit taxable?

Whether the death benefit must be taxed or not depends on the type of benefits. The death benefit for civil servants must be taxed at the recipient, such as the surviving spouse or the children as other sources of income. The same applies to the death benefits paid by the deceased’s employer. In both cases, the death benefit is payable, but free of social contributions. The tax code of the respective heirs applies.
 
However, benefits from the death benefit insurance are income tax exempt. However, this only applies to the death benefits. If, on the other hand, the death benefit insurance is terminated, the surrender value is subject to income tax.