Financial tip: cancel your life or pension insurance? Better not!

Financial tip: cancel your life or pension insurance? Better not!

According to a report by amp.focus.de,

Canceling bad life or annuity insurance is almost always the worst idea. The money guide “Finanztip” shows that there are alternatives to get out of the contract. This includes selling the insurance, lending it, exempting it from contributions and canceling it. However, termination in particular should be avoided as it is usually associated with losses.

According to a study by the insurance association GDV, the cancellation of life insurance is declining sharply. In 2020, only 291,000 contracts were terminated early, a decrease of 14.4 percent compared to the previous year. This is a direct result of the low interest rates, which mean that the so-called surrender values ​​and final bonuses in the event of early termination are often lower than the contributions paid.

Termination is therefore the most expensive way to get out of the contract, especially with older contracts. The administration costs and possible cancellation fees may cause further losses. Instead, selling the insurance to specific buyers may be considered. Consumers often receive a few percent more than if they canceled their contract.

In addition, borrowing against life insurance is a possible option if a large sum of money is only needed temporarily. However, it should be noted that the interest on the loan is usually higher than the interest rate in the contract, which can lead to losses.

Overall, it is important to consider individual circumstances and, if necessary, seek professional advice before making a decision. A well-filled emergency fund in your daily savings account can help you avoid getting into the situation of urgently needing a lot of money.