Term Life Insurance (Risikolebensversicherung)
Term life insurance pays an agreed death benefit if the insured person dies within a fixed term, with no savings component or accumulation of capital.
Comparison profile
- Trigger
- Fixed sum insured
- Insured interest
- The economic dependency of survivors, creditors, or business partners on the continued life and income of the insured person; protection against the financial consequences of premature death.
- Rating basis
- Age at inception, Sum insured, Contract term/duration, Smoker status, Health declaration or medical examination, Occupation
- Typical limits
- Sum insured is freely chosen at inception, from modest amounts up to several million CHF/EUR for mortgage protection or business succession needs, structured as level or decreasing (e.g. mortgage protection) cover.
- Target segments
- Private individuals, Families with dependants, Mortgage borrowers, Business owners (key person, credit protection)
Insured events
- Death from illness during the contract term
- Death from accident during the contract term
Key exclusions
- Suicide within the initial contract period (typically 2-3 years)
- War and warlike events
- Death caused intentionally by the beneficiary
- Material misrepresentation in the health declaration
- Participation in undeclared high-risk sports or aviation
Concept
Term life insurance covers the financial risk of the insured person’s premature death within a fixed contract term. If the insured person dies during the term, the insurer pays the agreed death benefit to the beneficiaries; if the insured person survives to the end of the term, no benefit is paid and premiums are not refunded. In Austria, this cover is often referred to as Ablebensversicherung.
Distinction from Whole Life Insurance
Unlike whole life insurance, term life insurance contains no savings component and builds no meaningful policy reserve; premiums essentially cover only the mortality risk and the insurer’s costs, which is why premiums for a comparable death benefit are considerably lower than for a capital-forming life insurance policy.
Typical Uses
Term life insurance is regularly used to protect surviving dependants against loss of income, to secure mortgage financing (decreasing term / mortgage protection insurance), or as part of business succession arrangements; because mortality probability increases with age, premiums typically rise over the contract term unless a level premium has been agreed.
Comparison and delineation
Term life insurance is the risk-only alternative to whole life/endowment and unit-linked life insurance: it delivers the highest death benefit per premium franc but builds no surrender value and pays nothing on survival, whereas the capital-forming alternatives combine death protection with a savings or investment component at a materially higher premium. It is frequently complemented by occupational disability insurance, which covers the separate risk of loss of earning capacity through illness or injury rather than death, so that both income risks of the insured’s working life are addressed together.