Hello, I’m new to the community but I’ve been lurking for a while and I’ve read all sort of horror stories on 3a life insurances already I haven’t signed anything yet, but I couldn’t find an answer to my doubt.
In short: I’ve used Comparis to get a quote from a consultant, and he offered me a pure risk life insurance with Zurich which I can put either on pillar 3a or 3b, my choice. But this is NOT the usual “pillar 3a life insurance scam” thread, please read on.
I am a 40-yo non-smoker male with no particular risk factors. I am married and we recently got 2 kids, no mortgages. I am employed and covered by usual death/disability pension, but I want to increase this coverage. For now let’s just focus on pure risk life insurance: if I die before retirement age, a lump sum is paid to my survivors. What I need is a FIXED PREMIUM, FIXED PAYOUT insurance. Easy.
I am already covering the maximum ~7k CHF/year of pillar 3a investment in a VIAC account. I do not want to mix life insurance and investments. But when I got contacted by a consultant through Comparis, he gave me an interesting offer - and a reasoning on why it might make sense.
The proposal I got (I didn’t sign yet) is a pure risk life insurance with Zurich with fixed premium ~1600 CHF/year at 25 years term for 500k CHF coverage and exoneration from premium payment in case of inability to work > 360 days. It also has a partial coverage feature in case of contract termination: If I keep paying the premium for at least 7 years and then I stop paying but then I die, then Zurich still pays back something to my survivors, ranging from 10k CHF (year 7) to 220k CHF (24 years). This is on par with the Generali offer I find on safeside.life (which is a tad cheaper but does not offer partial coverage in case of contract termination). Anyway, most offers I found online have much lower but VARIABLE premiums, which I do not want.
The interesting part of this offer is indeed the possibility of paying the premiums on a Zurich 3a account. The idea is that I pay the premiums in that account, but I will never cash out those money at retirement, they will just go there and be invested and collected by the insurance, so it’s not “mixing insurance and investment together”, it’s still a pure risk life insurance, there is no investment at all, the only advantage for me is that I can deduct those premiums from taxes. If the 3a performs well, they will give me a super-minuscule discount on the premiums which I don’t even consider because it’s laughable. If the 3a performs bad… not sure, I haven’t found it mentioned anywhere on the contract, but I don’t think they can ask me to cover the negative difference because the premium is fixed. If I decide to rescind the policy before the end of the contract, I get no refund.
Interestingly, they offered me the option to do it on 3b instead of 3a, but the advisor recommended 3a, for the reasons in my post above (tax deduction). I admit I found this model strange, and the advisor of course must have his own interest, but his reasoning of why depositing on 3a is convenient compared to non-3a sounded convincing to me, it looks to me that in this particular case paying in 3a has only advantages.
The reasoning is the following: instead of investing ~7k CHF/yr on VIAC 3a and paying 1600 CHF/yr premium separately, I can pay ~5400 CHF/yr on VIAC, 1600 CHF/yr on Zurich 3a, and invest other 1600 CHF/yr on something else (e.g., an ETF) to keep my yearly expense constant. Advantages:
I have 1600 CHF/year in investment which are not bound to pillar 3a withdrawal limitations. Better than having them as premiums, which I never cash out (because it’s pure risk life insurance).
At retirement age, vested benefits 3a would be less. This means that I cash out less – and hence I pay less taxes on that cashout. With the advisor we estimated something like ~5k CHF difference saved on taxes at retirement.
That ETF is likely to overperform the VIAC 3a portfolio.
The only serious advantage of non-3a life insurance in a situation like this, as far as I can see, is that with 3a you have zero control on the beneficiaries in case of your death: the money goes to your married partner and kids. Which might or not be 100% what you want depending on your situation.
Does it make sense? Thanks!