28. Apr 16

Withdrawing from life insurance policies: Review withdrawal

Anybody who wishes to withdraw from their life insurance policy or pension scheme can have someone review whether this is possible. This is generally more financially appealing than termination.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: A lot of consumers have taken out life insurance policies or pension schemes as a way of providing for old age. That being said, many life insurance policies have not developed as well as anticipated in recent years. The ongoing period of low interest rates as well as private liquidity requirements can result in consumers considering a premature withdrawal from their life insurance policy or pension scheme. In the case of termination, consumers have to content themselves with the surrender value. Withdrawal may be the more lucrative option.

The Bundesgerichtshof (BGH), Germany’s Federal Court of Justice, has opened the door to withdrawal from life insurance policies and pension schemes. In May 2014, the Karlsruhe judges ruled that it is possible to withdraw from a policy if the policyholder has not been properly informed about his option to withdraw. Flawed guidance concerning withdrawal could mean that the withdrawal period never commenced, with the result that it remains possible to withdraw from the policy even though years have passed since its conclusion. While the jurisprudence of Germany’s highest court initially applied to life insurance policies that were taken out in accordance with the so-called “Policenmodell” (policy model) between 1994 and 2007, the BGH extended this jurisprudence to policies concluded pursuant to what is termed the “Antragsmodell” (offer-acceptance model).

The BGH fleshed out what consumers can expect from rescinding a life insurance policy or pension scheme in July 2015, remaining faithful to its consumer-friendly jurisprudence. After a successful withdrawal from a life insurance policy, the insurer is only allowed to retain the tax on capital gains that was paid to the tax office for the client along with the solidarity surcharge. Beyond this, the insurer can only deduct a small amount for the insurance cover that was provided. Otherwise, consumers can expect to receive a complete refund of any premium payments to date. Additionally, consumers are not to be burdened with completion or administrative costs. According to the BGH, it is solely the insurer that bears this risk.

Consumers who wish to withdraw from their life insurance policies can turn to a lawyer who is versed in the fields banking law and capital markets law.

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