Quick Summary
- The aim of life insurance is either to cover risk or to build up capital (savings) for retirement.
- There are three main types of life insurance: term life insurance, mixed life insurance and unit-linked life insurance.
- As an insured person, you must decide whether the life insurance is to be taken out within Pillar 3a (tied pension provision) or Pillar 3b (untied pension provision).
- In principle, you can only save tax with pillar 3a. The federal government limits the tax-free contributions to life insurance policies each year. The “small” (tax-free) contribution is the maximum limit for people with a 2nd pillar; the “large” contribution applies to employed persons without a 2nd pillar.
- Life insurance is particularly suitable for the self-employed or people who have an increased risk of serious illness. Those who have high fixed costs or live in cohabitation can also provide better protection for themselves or their loved ones.
What is life insurance?
Life insurance policies include, on the one hand, insurance policies to protect against loss of earnings – term life insurance – and, on the other hand, insurance policies that serve to provide for the future, so-called capital-forming life insurance policies (savings). Capital-forming life insurance policies include mixed and unit-linked life insurance.
Life insurance is part of the 3-pillar system for old-age and disability provision.
Insured persons can choose whether they wish to take out insurance under
What types of life insurance are there?
Not all life insurance is the same. Depending on the type of life insurance, different benefits are included. There are basically three different categories:
- Term life insurance
- Mixed life insurance
- Unit-linked life insurance
What is term life insurance?
As the name suggests, (pure) term life insurance covers one risk, namely the sudden loss of earnings.
There are two possible reasons for a loss of earnings under the insurance:
- Death benefit insurance: This insurance provides financial support for the surviving dependants of the insured person in the event of their death. Click here for more information on whole life insurance.
- Disability insurance: Loss of earnings due to illness or accident is covered. Both the insured person and their family receive benefits.
What is a mixed life insurance policy?
Mixed life insurance is very popular in Switzerland.
It
Mixed life insurance is therefore term life insurance that allows policyholders to set aside assets for their retirement at the same time.
What is unit-linked life insurance?
Finally, there is unit-linked life insurance. In contrast to the other two types of life insurance, it is not as widespread. However, it is experiencing an upward trend in Switzerland, not least due to the rise in interest rates.
The insurance capital saved is invested in investment funds.
The level of return from which the insured person benefits
How can I save taxes with a life insurance policy?
It is the task of the state to promote private pension provision (including life insurance) with the help of tax relief. For this reason, the state favors fees paid into a life insurance policy with regard to taxation. However, a distinction must be made as to whether the life insurance policy was taken out under pillar 3a or 3b.
Can I save tax with a life insurance policy within pillar 3a?
Yes, these contributions are tax-free to a certain extent.
However, there are a few points to bear in mind.
Pillar 3a is a tied pension plan.
As the assets invested there are intended exclusively for retirement provision, insured persons can
In addition, not everyone can invest in pillar 3a: Only employed persons whose income is subject to AHV contributions are eligible for this option.
People with an employment contract have assets in both the
1st pillar and
2nd pillar.
Pillar 3a is therefore particularly
But beware: the tax-free amount that can be paid into pillar 3a is limited.
The federal government sets
- The “small” contribution: This applies to those who belong to a 2nd pillar (non-self-employed persons). For the year 2024, the federal government has set it at Fr. 7,056.
- The “large” contribution: This applies to people without a 2nd pillar, i.e. the self-employed. In 2024 it amounts to Fr. 35’280.
And what about pillar 3b?
Anyone who pays into Pillar 3b (or free pension provision) cannot deduct these contributions from their taxes. Under certain circumstances, however, the amounts paid out are exempt from tax.
For whom does life insurance make sense?
Whether life insurance makes sense always depends on your personal situation. However, there are some circumstances in which it is more advisable:
- Fixed costs: Do you have high fixed costs such as mortgage interest, family maintenance or rent? If these costs are no longer affordable if a family member’s salary is missing, life insurance can help.
- Serious illness: If a person dies due to illness, it is often difficult for surviving dependants to maintain their previous standard of living. The previous salary is much less insured in the event of death due to illness than in the event of death due to an accident. If a hereditary illness runs in the family, life insurance provides security.
- Self-employment: Those who are not employed do not benefit from a 2nd pillar. Assets and pensions from the 1st pillar are often not enough to live on in retirement as before. A 3rd pillar in the form of life insurance protects against loss of earnings and ensures sufficient savings in old age.
- Cohabiting couples: The law stipulates that only married partners receive benefits from social insurance (accident, health and disability insurance) in the event of death. Under pillar 3b, unmarried couples also receive benefits from life insurance. Within pillar 3a, there are conditions for being able to benefit cohabiting partners.
Seek advice from your trusted insurance company or bank to find out whether life insurance is right for you.
Are you concerned about what should happen to your assets after your death?