Life insurance is essential when it comes to peace of mind
“Life is difficult. This is a great truth, one of the greatest truths,” is how psychiatrist Scott Peck began his bestselling book, The Road Less Travelled. Few would argue with that and no one wants to make it even harder. However, we sometimes further complicate life especially when thinking about our own death.
As a SafeSide blog noted in “A Masterpiece of Life,” 9 July 2020, “death is a fact of life, and we should not forget the consequences it can bestow on our loved ones”.
Feelings about death often compound the challenges of getting the right insurance package, but pure life insurance can be essential when it comes to peace of mind. At SafeSide, we strive to make taking out a pure life policy as easy as buying a plane ticke online.
For some, pure life insurance seems bewildering if not well-explained or properly promoted. You may worry that you have to deal with agents and haggle with companies. You may not be sure if the final pay-out will be what you thought.
With SafeSide this isn’t the case. In reality, pure life is the simplest insurance product of all life and non-life policies. It’s easier than choosing car, household or even liability insurance, where there are more decisions to make and more exclusions to consider.
Why we strongly prefer pure life and not mixed life insurance
Insurance brokers often encourage enquirers to buy risk protection and a savings instrument within one product: mixed life insurance. At SafeSide we generally do not recommend purchasing mixed life insurance, because we believe it is better to split risk protection and savings. Here is a short overview as to why:
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Pure Life Insurance |
Mixed Life Insurance |
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Flexibility |
Fully flexible. Pure life can be cancelled at any time without penalty or hidden fees. |
Almost no flexibility. Cancellation prior to the end of the third year can be very costly. You lose all surrender value. |
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Cost |
Changing a pure life contract does not entail any costs. |
Making changes to your contract will usually result in additional costs. There are also often hidden costs that you don’t know about. |
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Surrender value |
No surrender value as you do not save/invest with a pure life policy. For saving/investing low fee, tax-efficient products at a bank/broker should be your preferred choice. |
Great savings disadvantage as your surrender value is strongly reduced by commission payments. You lose at least three years of payments which negatively affect your returns. |
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Life circumstance |
Easily adjust your pure life policy to your changing life circumstances. If you no longer need financial protection, just cancel it with no additional costs. |
Adjustments to your changing life circumstances are not easily made and can result in additional costs. |
Of course, in certain select cases mixed life insurance may make sense. In general, though, we believe you are much better off with the flexibility and transparency of pure life insurance.
Noteworthy-fact: around a third of life insurance contracts are not held until maturity. In the case of mixed life insurance, this often results in a significant financial loss.
Pure life insurance beneficiaries and payout
A pure life policy pays beneficiaries a fixed amount if the insured person dies within the agreed term. It has no surrender or expiry value and is designed only for the financial protection of beneficiaries. So, pure life insurance allows you to create a financial safety net for your loved ones easily.
In addition to couples and single parents, others who can benefit from pure life insurance include:
Entrepreneurs and self-employed: As an entrepreneur or self-employed person your company often forms the bulk of your assets. If the value of your company is derived from you, it makes sense to consider pure life insurance. Should something happen to you, your loved ones will receive the agreed sum, which reflects at least part of your life's work and dedication.
Homeowners: Owning a house is a life dream for many. With a pure life policy, you can ensure your loved ones will be able to bear mortgage costs and stay in their home.
Trainees or students: Often parents take on substantial financial obligations to pay for their children's education. As a trainee or student, it may make sense to take out a policy for your parents’ benefit. Premiums should be relatively low due to your age and you can change beneficiaries at a later date when your life changes.
Unregistered partnerships: Pure life insurance is an expression of long-term commitment which can be valuable for people in serious relationships without the benefit of marriage or civil partnerships. For more details see our blog “A Valentine’s day gift you certainly never thought of!”, 13 February 2020.
Swiss Pillars 3a and 3b
In Switzerland, pure life insurance policies are normally based on Pillar 3a or 3b categories of retirement savings. SafeSide’s policies are offered as part of Switzerland’s Pillar 3b plan. In a later blog we will discuss the advantages and disadvantages of 3a and 3b, and why we think our pure life insurance under Pillar 3b is a good plan. In the meantime, you can take a look at this article for more info about Pillars 3a and 3b.
How much do you need/can you afford, and for how long?
Pure life insurance can last anywhere from one to more than forty years. Since the period is so vast, it might seem baffling to choose the right time period. The right period depends on what you want to achieve with your policy. If you have children and you want to buy life insurance to protect them, calculate how many years before they leave home or set up their own independent lives.
If you have a mortgage, consider buying pure life insurance for your loved ones until the mortgage has been amortized to an acceptable level. You may also choose to cover the time until your retirement.
Transparency
SafeSide aims to ensure that you get to know, like and trust us. Everything we need to ask you is on our application form, simply explained without jargon or mumbo jumbo. It offers all the information you need to be able to make an informed decision, without the necessity of an agent or doctor visit.
Many policies have a lot of exclusions or clauses in the small print, making you worry if the insurer would pay up fully in the end. SafeSide Life makes it clear that we can only curtail or cancel payouts:
1. If you provide incorrect information in your application
2. In the case of suicide
3. In the case of death by participation in acts of war
We take satisfaction in building a community rather than just a contact book of customers for upselling and increasing fees.
If you’re thinking about a pure life policy, but unsure what is right for you, get in touch with us at SafeSide.