My finances, my projects, my life
December 5, 2019

This insurance protects your family in the event of your death

  Compiled by myLIFE team myWEALTH May 15, 2017 7753

Whether you are a parent or grandparent, it is natural to want to secure your family’s financial future. Possible solutions include tax-enhanced insurance policies specially designed for this purpose, and which allow you to consolidate your future financial position.

Would you like to guarantee financial peace of mind for your family in the event of an accident or your death? Life insurance policies are one option worth considering. Packages vary between companies but the main types can be divided into two categories: term life policies and endowment policies.

Term life insurance

Whether the payout is fixed or decreases over time, term life insurance offers your family financial security. In the event of the policyholder’s death during the term of the policy, it pays out money to your chosen beneficiary or beneficiaries.

Mortgage protection insurance covers the outstanding balance of your mortgage. The equivalent insurance for personal loans is called loan protection insurance. Both constitute term life insurance and the amount payable will fall over time.

  • The insurance company covers the amount still owed to your bank in the event of your demise.
  • You choose the amount that you wish to insure and the duration of the policy.
  • The premium is calculated according to the policyholder’s age, the term of the policy and the capital insured.
  • Most insurance companies allow you to take out additional cover (disability, accident).

Strictly speaking, term life insurance pays out a fixed amount. This solution ensures that your beneficiaries receive this money if you die before your policy expires.

  • You choose the amount that you wish to pass on and the duration of the policy.
  • You determine the frequency of payments, whether you opt for a single payment or regular instalments.
  • The premium is calculated according to the policyholder’s age, the term of the policy and the capital insured.
  • You can ask to surrender your whole policy at any time or, through an amendment, “suspend” your policy, i.e. stop paying premiums. The latter option carries the major advantage of having no tax implications.
  • Most insurance companies allow you to take out additional cover (disability, accident).
  • As well as making a payout to your loved ones in the event of your death, your family can, depending on the company, access 24/7 support to help them if you die abroad (repatriation and funeral).

Endowment policy

Endowment policies combine the benefits of life assurance and insurance. They pay a guaranteed amount if you are still alive when the policy matures, plus any profit share. If the policyholder dies before the policy matures, then beneficiaries receive the guaranteed term payment plus any profit share. Here too, most insurance companies allow you to take out additional cover (disability, accident).

As well as greater financial security for your family, this insurance lets you claim a tax deduction (…)

The tax benefits of your insurance

As well as greater financial security for your family, this insurance lets you claim a tax deduction if you are a Luxembourg (tax) resident. Its amount will depend on your situation.

 MAXIMUM DEDUCTIBLE AMOUNTS ON PREMIUMS AND CONTRIBUTIONS
 
TaxpayerWithout spouseWith spouse
without childrenEUR 672EUR 1,344
with 1 childEUR 1,344EUR 2,016
with 2 childrenEUR 2,016EUR 2,688
EUR 672 per additional child

It is worth noting that, although these products are exempt from Luxembourg income tax, the maximum deductions for this insurance cannot be claimed on top of deductions for interest on personal loans.