3b + life insurance - get me out of here!

Banks, Insurances & Third Pillar
1

Dear all,

I’m reading Marc’s book and I now know I made a mistake a year ago when I contracted a 3rd pillar 3b with life insurance.
My questions are : can I get “out” of life insurance? Can I change my 3b to 3a? Will I have to close the account and open a new one? Will I loose the money I already have there (not much, it’s been a year and I pay the minimum)? What can I/cannot do?
Thank you for your help.
Have a great day,
Laura

2

Hi Laura

First of all think about if you even need a life insurance. Do you have house to pay off, and little children? If not, you probably don’t need that. If you need one it’s probably better to get a Risikolebensversicherung without a saving part.

Will I loose the money I already have there (not much, it’s been a year and I pay the minimum)?

You will probably not get all of it back, but that’s ok. First, in the long term losing that bit of money is still a much much better and cheaper option. Second, just imagine you paid for insurance with that lsot money. After all you were insured for one year :slight_smile:

Just contact them and ask them to cancel your policy, after you got en insurance you need from somewhere else. Then just live with their cancelling conditions, it’s still the best way.

3

Yes you can, you have to terminate your contract, but you will lose your first premium. Since it is a 3b, you are probably living in Friboug or Geneva where the maximum deductible amount is 1’000 respectively 2’200 CHF.

Yes you can, but don’t do it ! I did it this year in April and then find out Marc’s Blog and the FIRE movement and I terminate my agreement with my old 3b, new 3a, life insurance and lost 4’400 CHF (2 premiums).

4

The good news is that you can from now open an account and put money with a 3a provider like finpension or VIAC. So you will be able to deduct taxes.

The bad is that you’ll lose money on 3b. Two options: cancel the insurance or reduce the premiums.

5

Hi Laura, you have 3 options here:

  • Terminate the policy and swallow the loss. Invest the money directly in ETFs with a broker or use a cheap digital asset management service (like Truewealth) or ETF-linked savings plan (like the VZ ETF savings plan). If you want to save for retirement, I recommend a Pillar 3a asset management service (like frankly, VIAC or finpension). In the long-term, this will in all likelihood be the most profitable option because if history is anything to judge by, the returns will far outweigh the loss incurred by terminating your cash-value life insurance. If you need life insurance, stick to term life insurance. I use Turtleneck and Vaudoise.
  • You can keep your cash-value life insurance policy, but this only makes and financial sense at all if you stick with it until the policy matures. If you terminate it before maturity at any point, you will make a loss on total premiums paid. The guaranteed returns of Swiss cash-value life insurance are generally lower (average 20%) than the sum total of premiums paid. You can find some examples on my blog. The difference should ideally be compensated by dividends and returns on the invested portion of cash value, but that won’t likely happen until the policy matures. In the best case, expect to make a small return similar to what you would make with a savings account. Historically, insurance companies have performed ok when banks have performed poorly (i.e. in 2008), so it could be an option for diversification. But it comes at a pretty big opportunity cost. It generally is not possible to convert it from the pillar 3b to the pillar 3a (the other way around is an option for some policies). In most cases they will terminate your pillar 3b policy and give you a new pillar 3a policy, with the losses that come with terminating a policy. But rules vary between insurance providers and individual life insurances.

It is generally possible to put your cash-value life insurance on hold, in which case it will remain in place but you won’t have to keep paying premiums. But if it has cash value you are generally better off cashing it out and investing it elsewhere.
Too bad life settlements are not an option for Swiss cash-value life insurance, as that would let you get some money back. But when you consider the amount of money insurance companies make off surrendered policies, it isn’t surprising.

6

Thank you for your answers.
For the time being, I’ve got out of the life insurance without any cost. They told me I can change from 3b to 3a but they say I can invest in EFT even though I have a 3b. This information is the contrary to what is stated in Marc’s book…mmmm… I will keep on reading…

7

They probably don’t really care if its 3a or 3b, as long as you stay with them. But the point is that you do not want to stay with them and their high fee products.

And of course you can privately invest in other ETFs… That has nothing to do with them.

To really be out you have to get your money out of their company, either on your bank account (if it was in 3b) or to another cheaper 3a provider.

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8

Hey everyone,

My wife and I are in a similar situation. We do not know what to do and seek your advice. Instead of setting up a new topic I thought replying here directly makes more sense.

At the age of 21 in April 2011, my wife signed a 3b life insurance with Liechtenstein Life via i.l. team ag (https://www.ilteam.ch/). She didn’t feel comfortable signing it in the first place. But her (extended) family pressured her in signing-up for it. According to them it was a good idea…a good and safe investment. She eventually caved due to the pressure and since has been paying CHF 200 a month. So far she has paid CHF 25.8k into it.

Once I entered her life and it became more serious between the two of us, we started talking about our personal finances. I discovered that she already had a 3b life insurance, but she didn’t know anything about it. She just kept paying the bills and didn’t look into her policy/portfolio at all. She had no idea what was happening. It didn’t interest her. To her it was something she never wanted in the first place, so why worry about it? This was a big fat red flag to me. So, I started looking into it…

I checked the past yearly asset statements of her policy published by the insurer and was shocked. Basically, every three years they kept changing the funds in her portfolio:

This to me was the second red flag. Why did they keep changing the funds? Except for the most recent, all the funds have been discontinued. I can’t find any information about them, except for the links I shared above. They must have been performing badly. And moving funds every 2-3 years must have been costly too, considering all the fees (issuance, redemption, management) they had (example). This worried me.

Well, then I logged into her life insurance account and saw that her portfolio currently sits at CHF 19.4k. My heart sank: That’s CHF 6.4k less than what she paid into. That’s a whooping -25%. I confronted her with it and she started crying…My hunch that something was not good and her initial gut feeling over 10 years ago were proven right. A very costly lesson in life.

The question now is what should we do about it? I have no idea what the next steps should be. I couldn’t find any information about her life insurance policy on their website. Nor can I find any terms of conditions for the policy she signed up for. All I found was this for a different product that they are offering. Regarding termination of that product they state the following:

Kündigung und Beendigung
Sie können Ihren Versicherungsvertrag jederzeit in Textform kündigen. Ihre Kündigung wird zehn Bankarbeitstage nach Zugang bei der Liechtenstein Life Assurance AG wirksam. Durch die Kündigung beenden Sie den Versicherungsvertrag und den Versicherungsschutz. Der Versicherungsvertrag endet darüber hinaus mit dem Tod der versicherten Person oder mit Auszahlung der Erlebensfallleistung.

Rücknahmekurs
Der Rücknahmekurs ist der Preis, zu dem wir Entnahmen aus den gewählten Fonds und/oder Sondervermögen vornehmen.

Rückkaufswert vor Ende der Aufschubzeit
Nach einer vollständigen Kündigung erstatten wir den Rückkaufswert Ihrer Versicherung. Diesen Rückkaufswert berechnen wir anhand der Anzahl der gutgeschriebenen Fondsanteile und dem Rücknahmekurs dieser Fondsanteile zum Kündigungszeitpunkt, ab dem 11. Vertragsjahr wird zusätzlich der Treuefonds berücksichtigt.

Rückkaufswert in der Rentenzahlungsphase
Falls Sie eine Rentengarantiezeit vereinbart haben, entspricht Ihr Rückkaufswert in der Rentenzahlungsphase dem Barwert der zwischen Kündigungszeitpunkt und Ende der Rentengarantiezeit noch zu zahlenden künftigen garantierten Renten. Zukünftige Überschussbeteiligungen werden dabei nicht berücksichtigt. Nach Ende der Rentengarantiezeit, oder, falls keine Rentengarantiezeit vereinbart wurde, gibt es in der Rentenzahlungsphase keinen Rückkaufswert.

Unfortunately, I do not understand what this would mean for us. I am a little bit out of my depth here.

Clearly, we do no longer trust Liechtenstein Life and i.l. team ag and are considering terminating her policy. Her policy runs till 2041 and the premium is set at CHF 72k. What would it mean for us if we terminated her policy? We are willing to take a loss and be done with it and passively invest in something we feel more comfortable with and have under our own control. Should we contact them and discuss other options?

What do you think? What would you do?

Thanks in advance!

9

Contact them how to cancel the contract and ask how much you get back. Not “discuss other options”, since any “discussion” would likely amount to them trying to sell more/other crap to your wife. Well, maybe not even crap, but what’s the point in “discussing” it with them when you don’t trust them anyway?

:point_right:t2: "I want out. How much will I get back if I cancel now and where it can legally be transferred to?

Should be a fairly straightforward question.

(No, I do not want just “pause” the payments, I am considering cancelling outright, and no, thank you very much, by cancelling I mean cancelling and not investing into any other product with you guys or shifting my investment strategy)"

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