Insurance World

Whole life insurance, also known as “cash-value” insurance is a basic and consistent type of permanent life insurance which remains in effect your entire life at a level premium. This life insurance is a good choice got you if you do not expect your life insurance needs to diminish over time. A portion of your premium goes into a reserve fund called ‘cash value’ that builds up over the years your policy is in affect. Your reserve fund is tax-deferred and you can borrow against it, until you withdraw it.

The premiums must generally remain constant over the life of the policy and must be paid periodically according to the amount indicated in the policy. You may also have the option of a single premium —– paying all of the premiums at once with a single lump sum. Your cash values will grow to equal the amount of the death benefit when you turn to age 100.

Although, whole life insurance is very expensive, and if you’re on a limited budget, you may not be able to afford all the insurance coverage you actually need. But the plus point is that the death benefit is guaranteed as long as premiums are met. Also death benefit will never decrease if you don’t borrow against it.

Whole life insurance policy’s returns will fluctuate with the markets and will usually follow returns available from other investments like equity mutual funds. However, if you decide to quit your policy, your cash value can be paid in cash or paid-up insurance.

Whole life insurance is most suitable for you, if you want to:

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use it as a tax and estate planning vehicle,
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accumulate cash value for a child’s education or retirement,
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pay final expenses,
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provide money for a favorite charity,
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fund a business buy/sell agreement,
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provide key person protection.

Before buying the whole life insurance, you need to think carefully about choosing your level of coverage. Too often people make the mistake of insufficiently covering or even worse, financially overextending themselves. This would be a tragic error with whole life insurance policy because defaulting on premium payments can mean policy cancellation and the loss of your entire investment. So be careful and make sure you:

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pick a life insurance policy that has a guaranteed cash value starting at the very first year,
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choose the one with the highest cash value in the very first year,
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consider “participating” insurance policies which can pay dividends, increasing your policy’s value by boosting both the total cash value and the death benefits,
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beware of any insurance policy that levies “surrender charges” when you cancel.
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if you ever need to stop paying premiums, your policy lets you use the accumulated cash value of the life insurance policy to pay the premiums, thus keeping your coverage current.

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About 87 percent of the residents of Germany have statutory health insurance, i.e. GKV. As of May 2005, the GKV relied on 321 non-profit sickness funds to collect premiums from their members and pay health care providers according to negotiated agreements. Those who are not insured this way, mainly civil servants and the self-employed, receive health care through private for-profit insurance.

An estimate of 0,3 percent of the German population (around 250,000 people) has no health insurance at all. Some of them are so rich that they do not need it but most of them are poor and receive health care through social assistance.

Germany’s statutory health insurance

There are three different categories of sickness funds: primary funds, substitute funds and “special” funds. Some workers are required to be members of the primary funds, e.g. if they earn less than the than the income ceiling (2006: EUR 3,937.50 per month / EUR 47,250.00 per year). Those earning more than that ceiling may be members on a voluntary basis, or they may have a choice of funds. Some of them automatically become members of a particular fund for example because of their occupation (company-based funds) or place of residence (local sickness funds). Some occupations have their own “special” funds, e.g. farmers or sailors.

Substitute funds are divided into two kinds: they provide health insurance to both white collar workers and blue collar workers earning more than the income ceiling. Membership is voluntary.

Both, employers and employees pay half of a member’s premiums, which in 2006 averaged between 13 and 14 percent of a worker’s gross earnings up to the contribution assessment ceiling (2006: EUR 3,562.50 monthly / EUR 42,750.00 p.a.). Premiums are fixed according to earnings rather than risk and are unaffected by the respective member’s marital status, family size, or health. Premiums are the same for all members within a particular fund with the same earnings.

Germany’s private health insurance

About eleven percent of Germany’s residents pay for private health insurance provided by some 40 for-profit insurance carriers. Many of those choosing private insurance are civil servants who want to secure percentage of their medical bills not covered by the government. Some sickness-fund members buy additional private insurance to cover such extras as a private room or a choice of physicians while in a hospital. Otherwise, the medical care provided to the publicly and privately insured is identical. In both cases the same medical facilities are used. Self-employed persons earning above the income ceiling must have private insurance. Members of a sickness fund who leave it for a private insurance carrier are not allowed to return to public insurance.

As opposed to the statutory heath insurance, contributions to the private insurance depend on the member’s age, gender, occupation and health status, that is, the individual risk. Although private insurance companies pay health care providers about twice the amount paid by the primary sickness funds, private insurance is often cheaper than statutory health insurance, especially for younger policyholders without dependents. As is the case for members of sickness funds, employees who have private insurance have half their premiums paid by their employers.