Guide to life insurance in Switzerland:
Calculate your yearly Swiss term life insurance premium CLICK HERE
How does life insurance in Switzerland work?
Life insurance is a powerful tax optimisation tool in Switzerland Read more>>
What Swiss life insurance products are available?
Swiss life insurance contracts are divided into the following types Read more>>
What amount should I be covered for?
The amounts that a resident can be covered for depend on the type of insurance subscribed to. Read more>>
Risk management – bonds, equity or insurance surplus?
With today’s low or even negative interest rates inflation is not compensated Read more>>
Extended coverage that should alwaysbe included in to life insurance plans in Switzerland:
Always include the waiver of premiums with a three month waiting period Read more>>
Extended coverage that can be added to the Swiss life insurance plan:
Recommended if your pillar 1 and pillar 2 savings pension funds are poorly funded Read more>>
Calculate your yearly Swiss term life insurance premium CLICK HERE
Glossary of Swiss insurance terms – Life insurance
FINMA
Swiss Financial Market Supervisory Authority (Eidgenössische Finanzmarktaufsicht).
Three pillar pension system
The Swiss pension system or three pillar system is known to be one of the best in the world. It is divided into three modules referred to as “pillars” or “pilier” in French.
Pillar 1: Social security scheme (AVS), this module is guaranteed by the state. It includes pension, disability and death benefits. All Swiss residents must contribute to the pillar 1 module for 44 years from 21 to 65 years old (64 for women)* or as soon as they receive an AVS salary. To qualify for the full pension of CHF 2’370.-* per month the beneficiary must have contributed for the complete 44 year period and to have earned at least CHF 3’754’080.-* over that same period (or an average of CHF 85’320.-* per year).
Pillar 2: Professional pension scheme (LPP), this module is guaranteed by the employers’ pension fund. It includes additional pension, disability and death benefits as well as accident (LAA) and optional illness related (PGM) loss of income benefits. The obligatory savings plan the employee must contribute to runs for a 40 year period from 25 to 65 years old; in this obligatory plan the capital accumulated corresponds to 12.5% (the average percentage over the period) of earnings over the 40 year period.
Pillar 3: Private pension scheme (3a and 3b), this module can only be guaranteed by a personal savings plan that can include disability and death benefits (life insurance). The pillar 3 module is designed to guaranty a comfortable standard of living at retirement. Pillar 3 is an integral part of the Swiss pension system, so the government offers large tax incentives to all private pension schemes. A private pension scheme with loss of income and death benefits can be subscribed to through an insurance company as soon as the beneficiary receives an AVS salary (pillar 3A) or when desired or required (pillar 3B).
Pillar 3A
Private pension scheme limited to residents who contribute to a professional pension plan (pillar 2) and in which the end of the insurance contract must be within 5 years of the legal age of retirement. Loss of income and death benefits can be added to the savings plan.
The yearly investment is tax deductible and can generate a tax saving of between 15 to 30% of the amount paid into the scheme. For Swiss residents who contribute to a professional pension plan the yearly investment is capped at CHF 6’826.-* from January 1 2019 (8% of the AVS maximum salary which increases over the years to compensate inflation); self-employed residents who do not contribute to a professional pension plan can invest 20% of their yearly revenue, capped at CHF 34’128.-* per year.
The cash invested in pillar 3A plans can be used before the end of the contract at their cash value for the following events:
- If the beneficiary leaves Switzerland
- If the beneficiary buys a property for personal use in Switzerland
- If the beneficiary needs to repay part of their existing mortgage
- If the beneficiary becomes self-employed
- If the beneficiary is within 5 years of retirement
The cash value of the private pension plan can also be pledged to guarantee a private loan with a financial institution or for a property purchase.
Pillar 3B
Private pension scheme with no restrictions on the end of the contract, professional status, age and the amount invested. Loss of income and death benefits can be added to the savings plan. Tax benefits for 3B insurance contracts are applied in the Canton of Geneva, but not the Canton of Vaud (or in most of the other Swiss Cantons).
The cash invested in pillar 3B plans can be used freely before the end of the contract at their cash value or be pledged to guarantee a private loan with a financial institution or for a property purchase.
Pillar 3B insurance contracts also offer more liberal beneficiary rights than pillar 3A contracts.
Waiver of premiums
The life insurance company will pay your premiums until the end of the contract if the policy holder suffers from a loss of income due to disability through accident and sickness; this guarantees the contractual savings and life insurance benefits.
Cash value
The cash value or cash surrender value is the sum of money an insurance company pays to a policyholder in the event that their policy is voluntarily stopped before its contractual termination date.
Insurance surplus
The surplus results if the contributions are calculated more cautiously than is necessary. The amount paid out is dependent upon the actuarial and underwriting performance of the company.
Positive changes in mortality, interest rate developments or efficient cost management can all increase insurance surplus.
*Figures at time of publishing, 01/2019.
