Saving through guaranteed insurance is expensive, moreover, low in value. If you want to have a guaranteed life insurance rating, you have to satisfy yourself with a guarantee of loss. Otherwise, I can not call it. Guaranteed insurance mainly concerns capital life insurance.
Technical interest rate and guarantee of appreciation
The maximum guaranteed ceiling is determined by the technical interest rate determined by the NBS. Contracts concluded prior to 1 January 2014 have a higher appreciation because the TMI was 2.5% and in the past in some years even 5% to 6% pa
Apart from the ceiling for appreciation, the serves to calculate payments for insurance products. It mainly affects the insured for survival and death. The lower the TMI, the more expensive insurance you get out and the less you get at the end of the insurance.
Where the insurance company invests your money
Each insurance company under the Insurance Act must meet the creation of technical provisions and must maintain its solvency margin. The technical provisions must be such that the insurance undertaking is able at all times to cover all insurance contract liabilities. These issues are overseen by the NBS.
Therefore, technical reserves also include money for future fulfillment in case of survival. Therefore, the part of the money that the insurance company needs to appreciate with guaranteed interest is being valued in the same way as its technical reserves.
Insurance companies under the law can only invest technical reserves very conservatively. They invest it eg. into conservative government bonds, treasury bills, mutual fund shares, term accounts, etc. Investment law is set by the Insurance Act.
Usually, the appreciation of technical reserves ranges from 3% to 4% pa The insurance company will pay you a portion of what is in addition to the surplus of the insurance company. But this can no longer guarantee.
Why is a life insurance benefit worthwhile?
- Interest is very low. 1.9% pa is very little. Even with a 4% interest, it still does not pay (more on the next point).
- For someone and the interest of 1.9% looks tempting nowadays. Remember, however, that the insurance company guarantees the appreciation for the entire amount you paid. All fees, administrative costs and insurance coverage costs are deducted from the premium. And when the rest is evaluated by guaranteed interest.
- If you have chosen the classic capital life insurance as a savings product, where you have to be insured to cover death, it significantly reduces the redemption value of the insurance. All the more so if it does not need such cover, but you have to pay for it.
Insurance is not true saving
Life insurance should be used for insurance. When you use to save money, you pay unnecessarily large fees, you do not know how much you save and how much you pay for fees, and you still have limited access to money. If you want to save, go for other products. This is especially true if you want to save efficiently.
For investment, I recommend using quality investment programs that invest without the participation of an insurance company and without unnecessary fees. There is a transparent fee structure and a person always knows what he is paying for, what he earns and how much he has in his account.
Are you interested in how you can set up life insurance and pay as little as possible? Or are you looking for a more efficient way of saving than insurance?