Term life insurance
If you are a self-employed professional, your next of kin will not receive a survivor's pension in the event of your death. With a term life insurance (overlijdensrisicoverzekering, OVR) you can ensure that your family will have a sufficient income. Your partner and children will then receive a benefit. How high this benefit is depends on the type of insurance you choose.
What is term life insurance?
If someone in paid employment dies, their partner and children receive a survivor's pension. This is not the case for independent entrepreneurs. If you die, your family is not automatically entitled to this pension. Do you want to make sure that your family will not get into financial trouble when you die? Then it is sensible to take out a term life insurance policy. With a term life insurance policy, your partner and children will receive a predetermined amount in the event of your death.
How does a term life insurance policy work?
You can insure yourself in various ways.
Level term life insurance
With a level term life insurance policy, you are insured for a fixed amount at a fixed premium for the entire term. It makes no difference when you die. The amount that your surviving dependents will receive will always remain the same.
Linear decreasing term life insurance
With a linear decreasing term life insurance, the amount that your surviving dependents will receive decreases each year by a fixed amount. The premium you pay also decreases. This form is especially interesting for older self-employed professionals: the older you get, the less your dependents’ need for benefits.
Annuity decreasing term life insurance
The amount that your dependents will receive also decreases with an annuity-based decreasing term life insurance policy. The amount decreases less rapidly at the beginning of the term than at the end. Your premium also decreases during the term. The annuity decreasing term life insurance is often taken out in combination with an annuity mortgage.
Duration of term life insurance
You can choose between a temporary or a lifelong insurance.
Temporary insurance
This will be paid out if you die within the agreed term: this is the period during which you are insured. For example, a term life insurance that is linked to a mortgage. Of course, a mortgage always has a certain term.
Lifetime insurance
There is no end date for this type of insurance. The insurance will always pay out in the event of your death.
What does term life insurance cost?
The premium you have to pay depends on a number of factors. First of all, on the amount that your dependents would receive in the event of your death. But also on your age and health at the time you take out the insurance. It is possible that your situation changes so much during the term of the insurance that you have to adjust the coverage upwards or downwards. Keep this in mind. Premiums for term life insurance are not tax deductible.
Inheritance tax
Do you pay the premium from your own equity? In that case, the payment to your surviving dependents is part of your inheritance and falls under the rules for inheritance tax (in Dutch). In some cases, the surviving dependents benefit is not part of your inheritance. This depends on who is listed on the policy as the policyholder and how your partnership is recorded.
Alternative to term life insurance
You can also compensate for the loss of your income for your dependents by providing a financial buffer. You can do this by, for example, saving or investing. Of course, you can also combine a financial buffer with a term life insurance policy.
Do you have any questions?
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