1. What is a life insurance?

A life insurance insures the death of a family member or business partner and provides financial security for survivors in the event of an emergency.

Life insurance therefore makes sense for anyone who wants to provide financial security for their partner, children or other dependents. In the event of death, a fixed sum is paid out to cover the dependents. The payout can be used to cover funeral expenses, cover running costs and continue the children's education. This is because, statistically speaking, on average one child in the United States loses a parent in every school class before he or she has even finished school.

Term life insurance can also be used to specifically secure a loan. This form of credit protection prevents relatives from having to give up their home in the event of an emergency - for example, if a real estate loan still has to be paid off but the installments can no longer be made. Such coverage can also be useful for business partners.

2. Amount insured and term of contract

Calculation example: term life insurance covers monthly income gap or provision requirements in the event of deathIn term life insurance, a fixed sum is agreed which is paid out to the beneficiaries in the event of the death of the insured person. How high this sum should be depends on the individual circumstances of the insured person and the beneficiaries. The following aspects play a role in determining the death benefit:

• Current expenses of the family or business
• Costs for the maintenance and education of children
• Current loans, for example for a property

As a general rule, the sum insured should be selected so that the surviving dependents can compensate for the resulting income gap in the first few years after the death of the main earner. As a rule of thumb, the recommended amount is three to five times the insured's gross annual salary. However, this is only a rough guide. We recommend determining the sum insured individually. This is the only way to ensure that the amount completely covers the pension gap in the event of death.

Like the sum insured, the term of the contract also depends on personal factors. Since the risk of death increases with each additional year of the insured person's life, the premiums are also higher the longer a contract runs. Nevertheless, a sufficiently long term is of key importance - because as soon as a contract expires, the entitlement to insurance cover in the event of death also lapses.

Especially for families with children, the term of term life insurance should therefore be well considered. The recommended term is usually until the end of the children's education or studies. By then, the offspring is usually in a position to stand on their own two feet financially. As a rule, this is the case at the age of 25.

The situation is different, however, for term life insurance policies with a decreasing sum insured. These are usually taken out to secure a loan. The insurance is based on the loan to be insured: the death benefit should be at least as high as the outstanding loan. In addition, the insurance should run until the loan is paid off. This is the only way to protect your family members or business partners from being stuck with the debt.

3. What does a life insurance cost and who are best life insurance providers?

Life insurance is comparatively inexpensive. The main reason for this is that - unlike endowment insurance - no assets are accumulated. In concrete terms, this means that no money is paid out at the end of the policy term - the insurer only pays out benefits in the event of death. A term life insurance policy with a sum insured of 150,000 euros and a term of 10 years is available for a 25-year-old for as little as about three euros a month.

The term of the contract and the agreed sum insured are the main factors that determine the amount of the insurance premium. The longer the contract is to run and the higher the insured death benefit, the higher the monthly insurance premium.

In addition, the premium amount varies, as it depends on the personal characteristics of the insured person. For perfectly healthy people with non-hazardous occupations and no high-risk hobbies, insurance is particularly favorable.

However, providers carefully weigh the insurance risk of the applicant. Smokers and people with risky hobbies such as skydiving or diving are usually subject to risk surcharges. Age, weight and general health are also taken into account when calculating insurance premiums.