Term life insurance is not a savings and investment insurance policy, such as endowment insurance, but serves solely to protect surviving dependants. This is particularly important if, for example, a large loan has been taken out to finance a home. With the financial benefits of the insurance, the relatives are able to pay off the loan after the death of the insured person. Provided, of course, that the amount paid out is sufficient.

In addition to ongoing loans that can be repaid in this way, financial security also offers the opportunity to maintain the accustomed standard of living, even if one or possibly the only salary is lost.
Also interesting: The right insurance cover - what do I need?

For whom is term life insurance useful?

If there is a risk that your own death will result in a considerable gap in provision for your surviving dependants, this is a good reason to take out such a policy. The joint family income drops by a considerable amount from one day to the next, especially if you are the sole earner. The financial gap cannot be made up by widow's and half-orphan's pensions, as can be read at NÜRNBERGER DIGITAL.
This is where term life insurance comes into play. It ensures that the future income of the surviving dependants is set up in such a way that the family is financially secure and can maintain its standard of living.

It does not matter whether it is a single couple or a family with many children.
It is not uncommon for joint business owners to take out term life insurance so that in the event of their death, the remaining business owner can continue to run the company seamlessly and without restrictions.
Term life insurance also plays a sometimes even decisive role in real estate purchases. For example, some banks require cover through these policies when taking out a loan.

Term life insurance for real estate loans

In general, however, it is advisable to take out term life insurance if you are planning to buy a house or property, even if the banks do not require it. In the event of death, the surviving dependents can then use the sum insured to service the loan installments. The death of a family member is bad enough and requires a lot of organization as well as time to come to terms with the loss. If the surviving dependants are then faced with an immense mountain of debt, which in the worst case could mean losing their own home, everything threatens to get out of hand. Financial protection for surviving dependants is therefore essential in such a case.

As already mentioned, term life insurance often serves as security for the bank when applying for a real estate loan. It is not uncommon for banks to require the borrower to have term life insurance and/or to offer it themselves. In this way, the banks ensure that the loan is actually paid off. However, you should not sign up to this straight away, but first make a careful comparison. There are considerable differences in the premiums and benefits of term life insurance policies.
Also interesting: The best retirement provision for women aged 40+

What is the right sum insured?

The sum insured that is paid out to your surviving dependants is determined when you take out term life insurance, whereby the amount of the sum insured and a dynamic are defined. A basic distinction is made here between an increasing, decreasing and constant sum insured, whereby an increasing or constant sum is particularly relevant.

For borrowers, the following applies in principle: the sum insured should therefore at least correspond to the amount of the loan in the event of a claim. Of course, it is almost impossible to know at the time of taking out the insurance how much your dependents will need in the future. However, if you have children who are at school or in training and have built a house or purchased a property, it is advisable to increase the sum insured.

According to the Federal Statistical Office, a child costs a whopping EUR 148,104 by the time it reaches the age of 18. Monthly costs have risen by 16% between 2013 and 2018 alone. However, this does not include costs for universities or other educational opportunities, for example. If there are several children in the household and a property loan to insure, you can quickly reach impressive sums. The insurance companies' recommendation that the sum insured should be at least three times your gross annual salary suddenly no longer sounds far-fetched.