Insurance Law

Cancelling a unit-linked life insurance policy

With a unit-linked life insurance policy, acquisition, administration and fund costs eat into the return, and there is no guaranteed interest rate. Cancelling under § 168 VVG gets you only the current fund value under § 169(4) VVG; for contracts taken out between 1994 and 2007, revoking under § 5a VVG old version can bring more instead. We review your contract and calculate which route yields the higher amount.

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Cancelling a unit-linked life insurance policy

Cancellation, surrender value and effective costs

With a unit-linked life insurance policy, you bear the investment risk. After deduction of the risk element and costs, your premiums flow into investment funds, and the maturity benefit depends solely on how they perform. You can cancel under § 168(1) VVG at any time, with effect from the end of the current insurance period.

What is paid out is the surrender value. For unit-linked policies the insurer calculates it under § 169(4) VVG as the current value, to the extent it has not guaranteed a specific benefit. A deduction is only permitted under § 169(5) VVG where it is agreed, quantified and reasonable; a deduction for acquisition and distribution costs not yet amortised is invalid.

The costs weigh more heavily on early exit. For unit-linked and hybrid products, the effective costs in the most expensive quarter of the market reach around 3.2 per cent a year after 15 years. According to BaFin’s report of 19 June 2026, that is roughly 1 to 1.5 percentage points above the figure for a policy that runs its full savings phase.

Revocation for policy-model contracts

§ 5a VVG old version applies to contracts from 1994 to 2007. The Federal Court of Justice held in its judgment of 7 May 2014 (IV ZR 76/11) that the one-year time limit in § 5a(2) sentence 4 VVG old version does not apply to life and pension insurance where the policyholder was not properly notified of the right of revocation. In that case the right of revocation continues to exist.

Revocation leads to the contract being unwound under unjust enrichment law, though the premiums are not repaid in full. Under the Federal Court of Justice’s judgment of 11 November 2015 (IV ZR 513/14), the policyholder of a unit-linked life insurance policy bears the investment risk on the savings portion; fund losses incurred reduce the amount refunded.

Alternatives to cancelling your unit-linked policy

Cancellation is not always the best route. Depending on the contract, the remaining term and how the funds have performed, alternatives can be more economically sensible. In Augsburg we review all the options and calculate which one brings you the highest return.

Making the policy paid-up and switching funds

Under § 165(1) VVG you can request conversion into a premium-free policy at any time, with effect from the end of the current insurance period, provided the agreed minimum benefit is reached. The existing fund units stay invested.

It is also worth looking at the fund selection, as many insurers now offer index funds and ETFs. Check the cost ratio of the funds on offer and the switching fees under your contract.

Selling on the secondary market

Unit-linked life insurance policies can be sold to specialist buyers. The buyer then takes on the fund risk. Whether a sale is worth considering for you depends on the remaining term, the fund volume and the contract terms. Compare any offer against the surrender value under § 169(4) VVG.

Reviewing your contract in Augsburg

The review starts at two points: the notice on the right of revocation, and the contract’s cost structure. From that we work out which route brings you the higher amount in your case. We work with your policy document, the contract terms and the annual statements.

Cost analysis and review of the revocation notice

We examine the notice in your contract for formal defects. For policies from 1994 to 2007, the notice on the right of revocation under § 5a VVG old version is decisive. In parallel, we analyse the cost structure: Zillmerisation, administration costs, fund costs and initial charges. From that we calculate what revocation, cancellation and making the policy paid-up would each yield.

Enforcing your claims

After the review, we assert the revocation against the insurer, initially out of court and, if refused, through the courts. Insurers rely on the offsetting of fund losses under Federal Court of Justice case IV ZR 513/14 to reduce the unwinding amount. We check the calculation item by item and challenge any deduction that goes beyond § 169(5) VVG and the case law.

Further information

These topics may also be of interest:

This information does not constitute legal advice in an individual case.

FAQ

Frequently asked questions: Insurance Law

Why is the surrender value of my unit-linked policy so low?

The surrender value of a unit-linked life insurance policy is the current value of your fund units less any outstanding costs. Zillmerisation, initial charges and ongoing fund costs (1.9 per cent effective costs a year on average) leave considerably less than you paid in. If the funds have also fallen, the surrender value can be far below the premiums.

What happens on revocation if my funds are down?

On revocation you generally get back all the premiums you paid. However, the Federal Court of Justice has held (judgment of 11 November 2015, IV ZR 513/14) that fund losses may be offset as reducing the enrichment. Even so, where fund performance is poor, revocation almost always leaves you better off than cancellation, because the high acquisition and administration costs are not deducted.

Can I switch the funds in my policy to save on costs?

Yes, most insurers allow a fund switch within the range they offer. If your insurer offers low-cost ETFs or index funds, switching can noticeably reduce your ongoing fund costs. Check beforehand whether your insurer charges a switching fee.

Is making a unit-linked policy paid-up worthwhile?

Making the policy paid-up can make sense if your existing fund units already hold reasonable value and the remaining term is long enough to benefit from a market recovery. You stop paying premiums and the existing units stay invested. Ongoing administration costs continue to apply, however, and reduce the fund value.

How does cancelling a unit-linked policy differ from a classic endowment policy?

The key difference: with a classic endowment policy you get a guaranteed surrender value; with a unit-linked policy, only the current fund value, without any guarantee. The risk of loss lies entirely with you. In return, a unit-linked policy can produce a higher maturity benefit if markets perform well. On revocation the difference is smaller, because in both cases you get back the premiums you paid.

Will my legal expenses insurance cover the costs?

As a rule, yes, where your legal expenses insurance includes contract law cover. We obtain confirmation of cover before accepting instructions. Since the gap between revocation and cancellation on unit-linked policies is often several thousand euros, pursuing your claim is frequently worthwhile economically even without cover.

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