Cancel life insurance now and invest?

[Ardius]

Hi !

I know that market timing is not the favorite subject in this forum but I have the following opportunities :

I signed a (f***) life insurance contract linked to my 3rd pillar in 2013.

Keys numbers :

• I already paid 7 * 4000 = CHF 28’000

End of february, the insurance wrote me following :

• Funds from the “réserve mathématique pour la garantie” : CHF 20’742
• Funds from the exceeding fees invested in funds : CHF 1’439

Only the CHF 1’439 are subject to market fluctuations (which of course has crashed since february)

Loss on this policy : 28’000 - 20’742 - 1439 = 5’819 (certainly a little bit higher since market crash).

My question is the following :

1. Should I cancel this policy as of end of april 2020 and transfer this money in my VIAC 3rd pillar ?

2. Take a death insurance not linked to my 3rd pillar (I have 2 little kids). Generali for example offer for ~250 CHF premium per year a constant insured capital of CHF 200’000 for 20 years.

Thank you for your help and advices !!

[Cortana]

1. Yes! You will make up for these 5.8k in no time.

2. Check out SwissLife.

[binfch]

Hi there

I am in a similar situation as I have a life insurance with a Swiss insurance company where I do pay yearly 4000 CHF and then complete 2800 CHF to VIAC (to max out the yearly 3a contribution).

How can you “transfer” the money from your canceled life insurance policy to VIAC without triggering taxes? Is that even possible?

Thanks & cheers

[Ardius]

I imagine if you transfer money on a 3rd pillar account no taxes are triggered… no ?

[zugzoo]

no taxes triggered if you transfer

[binfch]

Ok, I think that in this case life insurance money is tax free.

But I still don’t understand how the transfer technically would work. How/why VIAC would accept suddenly an important sum of money? I probably would need sort of proof that this money is part of my accumulated 3a pillar over the past years!?

[zugzoo]

your existing provider will provide this you need to send a registered letter with your new p3a details to make the transfer.

[Ardius]

In VIAC Portal you can generate a transfer order, then send everything to them (with life insurance resignation letter). They will ask for the transfer for you.

[Ardius]

Big news for me : I cancelled this life contract !

I just received the confirmation from Zurich. Amount to be received on VIAC : CHF 22k
Amount paid for this **** : CHF 28’000
Effective lost : CHF 6’000 - risk premium of CHF 1’400 (~200 CHF per year) = CHF 4’600

Next step : invest in shares with VIAC !

[CryingSofa]

Hey guys, I made the same mistake of starting a 3a life insurance and want to cancel it. In my case it’s from Helvetia.

Are there any gotchas that I might mess up when cancelling? Like some formulation I have to use?

[nugget]

please find my original posting of my 3a life insurance fail here: Bad investment choices: let others learn from your fails/ mistakes!

afaik there are no gotchas. get out, do mustachian stuff with it and become more happy than you are now

congrats @Ardius !

[Cortana]

I can’t believe how many are falling into this trap? Is there a reason for that? I mean we are talking about people that know one or two things about finance and investing.

[nugget]

@Cortana

I can’t believe how many are falling into this trap? Is there a reason for that?

yes. Financial advisors benefit largely from those polices, hence they actively market them. It is very lucrative to sell them, since intransparency allows for relatively large provisions. It takes well-above-average knowledge and willingness to get behind these products. Since the vast majority of people does not have them, these products keep beeing quite successful.

[nabalzbhf]

@nugget

Financial advisors benefit largely from those polices, hence they actively market them.

Indeed, you’re way more likely to get an email/call selling you those than a cheap passive solution. And the names are reputable (big banks/insurance names), many people tend to think the advisor will have their best interests in mind (but they’re salespersons, definitely not an unbiased party).

[CryingSofa]

@Cortana

I can’t believe how many are falling into this trap? Is there a reason for that?

Well… One of the first advices one can read in the FI community is that you should be maxing out your 3a. And even if there is a cautionary ‘but not from your insurance’, it’s likely to get overlooked. Add in the eager ‘advisors’, and there you are.

[Wolverine]

@Cortana

I can’t believe how many are falling into this trap? Is there a reason for that? I mean we are talking about people that know one or two things about finance and investing.

I’m not sure I understand your comment. For most people in Switzerland, known investing options are:

• Savings accounts -> yields are currently in the 0% range ;
• Real Estate
• 2nd pillar -> invested by pension funds so no direct play in it ;
• 3rd pillar
  ° bank option -> yields in the 0% range ;
  ° insurance option -> the advisor is sure to tout a high yield and to downplay the part of the money that doesn’t go into savings, or the high fees, often both.

For the average+ investor, pre VIAC-like solutions, insurances 3A solutions looked like an attractive option. Even now, VIAC/Valuepension are pretty recent actors that some can’t yet trust with long term retirement money (I’m one of them, even wondering if, as things are, putting money in 3A is really interesting on a risk adjusted basis), which leaves the old same insurances and banks as considered options (Frankly. may change that with ZKB as a trusted partner).

[San_Francisco]

@Wolverine

For most people in Switzerland, known investing options are

I would also include stocks/equity and equity funds among them (“known” investment options).
It’s just that they are frequently deemed as too risky and/or too expensive/requiring to much capital.

[CryingSofa]

So this is stressing me more than it should… Is the cancellation really as easy as writing

Hereby I cancel my contract(s) XXX per the beginning of next year. Please send me a written confirmation that cancellation was successful.

and send this per certified letter? Or do I need to mention anything else?

[Gesk]

I think for a 3a contract they will ask you for a new account within the 3a system to transfer the funds that you might have. So if you just send the old contract number and company address to your new account provider they will do it (the cancellation) for you. (at least that is how it works with viac if I remember correctly)

[Wolverine]

It should be enough, maybe with the 3A informations that Gesk mentions.

If it isn’t enough, it will start the process and you’ll be able to provide whatever they ask for after that. Unless you’re certain that the earlier next term to cancel it is the beginning of next year, I’d change that formulation to mention the 31.12.2020 so as to make sure that it doesn’t overlap with your 2021 available 3A contributions. If that’s not an available term, they’ll mention it to you and you’ll be able to double check it to see if they’re right on it.