Cancelling unit-linked life insurance
Cancelling unit-linked life insurance – surrender value, costs & cancellation in Augsburg
Your unit-linked life insurance policy is proving disappointing: returns are falling short of expectations, and on closer inspection, initial charges, management fees and fund costs are eating into a large portion of the returns. The BaFin has publicly criticised the fact that many unit-linked policies do not offer customers adequate value. However, cancelling the policy often yields only the current fund value minus costs – with no guarantee. Your prospects are significantly better if the contract was taken out between 1994 and 2007 under the policy model: the ‘revocation clause’ allows for the contract to be rescinded and returns all your premiums to you – regardless of how the funds have performed. As specialist solicitors in insurance law in Augsburg, we will review your contract and show you the best financial course of action.
Why many unit-linked life insurance policies are disappointing
With unit-linked life insurance, you, as the policyholder, bear the full investment risk. Your premiums are invested in investment funds – after deduction of the risk component and costs. There is no guaranteed rate of return. The maturity benefit depends solely on the performance of the selected funds. The problem: the effective costs of unit-linked policies average around 1.9 per cent per year. With a fund return of 5 per cent, less than half of the return remains with the policyholder after costs. Added to this are zillmerisation, entry charges and hidden commissions, which further reduce the return.
The cancellation option – particularly valuable when fund performance is poor
With unit-linked life insurance, a revocation can be economically advantageous: whereas a cancellation only yields the current fund value, a successful revocation leads to the unwinding of the contract. However, according to the case law of the Federal Court of Justice (ruling of 11 November 2015 – IV ZR 513/14), any fund losses incurred can be offset to reduce the claim; to that extent the policyholder bears the investment risk. A full refund of all premiums is therefore not guaranteed – the refundable amount depends on the specific contract and the performance of the funds.
Tell us about your situation - without obligation and nationwide.
Fund Policy Check
Check whether your unit-linked life insurance policy is affected by the ‘cancellation clause’ – and find out how much more you could receive by cancelling it.
Alternatives to cancelling your unit-linked policy
Terminating a policy isn’t always the best option. Depending on the terms of the policy, the remaining term and the fund’s performance, alternatives may make more financial sense. Here in Augsburg, we review all the options and calculate which one will yield the highest return for you.
Exemption from contributions and switching funds
If you opt for a premium holiday, you stop paying premiums, but your existing fund units remain invested and can continue to grow. It is also worth reviewing your choice of funds: many insurers now offer low-cost ETFs or index funds as an alternative to expensive actively managed funds. Switching to lower-cost funds can significantly reduce ongoing costs and substantially improve your remaining return. Check your range of funds and any potential switching fees.
Second-hand sales
Unit-linked life insurance policies can be sold to specialist buyers. The sale price is usually 3 to 10 per cent above the surrender value. However, the secondary market for unit-linked policies is smaller than for traditional endowment policies, as buyers also assume the investment risk. Whether a sale is possible and worthwhile in your case depends on the remaining term, the fund volume and the terms of the policy.
This is how we review your unit-linked life insurance policy in Augsburg
Assessing unit-linked life insurance policies requires not only expertise in insurance law but also an understanding of fund structures and cost models. In Augsburg, we systematically analyse your policy and calculate the most financially advantageous way to exit the policy.
Cost analysis and review of the cancellation policy
We first check the cancellation policy for formal errors – these are common in contracts based on the policy model (1994–2007). At the same time, we analyse the cost structure of your contract: Zillmerisation, ongoing administrative costs, fund costs (TER), entry fees and any kickbacks. On this basis, we calculate how much a withdrawal, cancellation or premium waiver would yield in each case.
Enforcing your claims
Once we have reviewed the case, we will enforce the cancellation against the insurer – initially out of court, and if rejected, through the courts. In the case of unit-linked life insurance policies, insurers often argue that fund losses should be taken into account in accordance with Federal Court of Justice case IV ZR 513/14 in order to reduce the refund amount. We are familiar with this line of argument and ensure that the calculation is carried out correctly and that no more is deducted from you than is legally permissible.
Frequently Asked Questions
Further information
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This information does not constitute legal advice in individual cases.
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