Cancelling endowment insurance
Cancelling a whole-of-life insurance policy – surrender value, cancellation rights & your rights in Augsburg
Your endowment policy is yielding less than you had hoped, and you are considering cancelling it. But be careful: if you cancel, you will only receive the surrender value – and due to zillmerisation and surrender charges, this is often far below the premiums you have paid. The Federal Court of Justice (BGH) has declared many surrender charge clauses to be invalid (judgement of 25 July 2012, IV ZR 201/10). Your chances are even better if the policy was taken out between 1994 and 2007: in such cases, it is often possible to revoke the policy, which will refund you all premiums plus interest. As specialist insurance lawyers in Augsburg, we will review your policy and secure the maximum payout for you.
Why cancelling a whole-of-life insurance policy is often a bad idea
Endowment insurance combines a savings plan with life cover. Each premium is divided into a savings component, a risk component and a cost component. The problem: the initial costs – particularly the agent’s commission of up to 5 per cent of the total premium – are offset against the premiums in the first few years (Zillmerisation). This means that anyone who cancels within the first ten years will receive a surrender value that is significantly lower than the premiums paid. For older policies with a guaranteed interest rate of 4 per cent (taken out before July 2000) or 3.25 per cent (up to the end of 2003), cancelling the policy can also mean losing an attractive guaranteed rate of return that is no longer achievable on the capital market today.
The cancellation option – particularly lucrative for endowment policies
With endowment life insurance in particular, a revocation can be economically especially significant: these contracts often run for 20 to 30 years, the total premiums are high, and the gap between the surrender value and a possible unwinding value can be correspondingly large. If your contract was concluded under the policy model (Policenmodell) between 1994 and 2007 pursuant to § 5a VVG (old version) and proper notice about the right of objection was not given, a revocation with subsequent unwinding may be an option. In that case the savings portion of the premiums plus the benefits derived from them is generally reimbursed, less the risk portion and any capital gains tax.
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Endowment Insurance Check
Check whether your endowment policy is affected by the ‘cancellation clause’ or whether a cancellation fee was unlawful.
Alternatives to cancelling – before you throw money away
Cancelling your policy isn’t the only option if you don’t wish to continue with your endowment insurance. Here in Augsburg, we can advise you on all the alternatives and work out which one is the most cost-effective for you.
Exemption from contributions – placing the contract on hold
If you opt for a premium waiver, you stop paying premiums but the policy remains in force. The existing policy reserve continues to accrue interest until the policy expires – for older policies with a 4 per cent guaranteed rate of return, this is a highly attractive investment that you cannot replicate on the capital market. Death cover remains in place at a reduced level. A premium waiver is often the better option than cancelling the policy, particularly for policies with a high guaranteed interest rate and a long remaining term.
Sale on the secondary market – more than the surrender value
Specialist buyers (policy buyers) purchase endowment insurance policies and generally pay 3 to 15 per cent more than the surrender value. The buyer takes over the premium payments and receives the insurance payout upon maturity. This option is particularly worthwhile for policies with a high guaranteed interest rate and several years remaining until maturity. However, not every policy is suitable for the secondary market – providers check the policy terms, remaining term and return prospects. We can advise you in Augsburg on whether selling is the better option in your case.
This is how we review your endowment insurance policy in Augsburg
Whether it’s a cancellation, a claim for additional payment following an unlawful cancellation fee, or advice on the most financially advantageous exit strategy – we’ll systematically analyse your contract in Augsburg and show you which option will yield the best financial return.
Individual contract review
We review your insurance policy, the general terms and conditions of insurance, the cancellation policy and all addenda. In doing so, we clarify: Is the cancellation policy incorrect? Has an unlawful cancellation fee been deducted? Is the surrender value paid out below the statutory minimum surrender value? Based on this review, we calculate how much money you are entitled to – through cancellation, a supplementary claim or via the secondary market.
Enforcement against the insurer
Once we have reviewed your case, we will pursue your claims against the insurer. We will initially attempt to resolve the matter out of court, setting a clear deadline. If the insurer refuses, we will bring the case before the relevant regional court. In the case of endowment life insurance policies, the amounts in dispute are typically in the five-figure range. The success rate for thoroughly reviewed cases is high – many insurers settle as soon as a claim backed by legal counsel is supported by case law from the Federal Court of Justice.
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Further information
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This information does not constitute legal advice in individual cases.
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