Life insurance glossary
Insurance is often a complex matter. Here is a glossary to help you see things more clearly.
A - Tax advantage
Several life insurance solutions offer a tax benefit and thus reduce taxes. Of course, pension savings and long-term savings are the best known, but you can also receive a tax benefit from your group insurance premiums as a worker. For self-employed people, a PSPS, PCS, IPA or an INAMI contract are also tax-efficient products.
B - Branch 21 and branch 23
These two concepts are discussed frequently with respect to insurance. But what is the difference?
- A branch 21 insurance policy offers a guaranteed interest rate, possibly supplemented by a profit sharing bonus. Due to low-interest rates, this guaranteed interest rate has declined significantly over the past decade.
- With a branch 23 insurance policy, the return depends on one or more underlying investment funds. You can expect a better return, but you must also take into account the investment risk.
C - Cancer
The dreaded C-word. A cancer diagnosis at any given time is always a shock, with a possible financial impact, worries at work, etc. Hospitalisation insurance will protect you financially against medical expenses, while guaranteed income insurance will protect you against a loss of income. Some types of outstanding balance insurance provide for a separate capital payment in the event of a cancer diagnosis.
D - Discrimination
In the past, men paid more than women for death coverage because they live shorter lives on average. However, discrimination on the basis of sex has not been allowed in recent years. In other words, there is no longer any difference in premium between men and women for the same insurance product.
E - Early start
Saving for your pension is essential. The earlier you start, the bigger your supplementary pension capital will be. It is therefore in your interest to start saving for a pension as soon as possible (preferably as early as your 18th birthday), even if your pension is the last thing on your mind.
F - Family
Insurance products offer many options to protect your loved ones financially, from savings plans for your (grand)children to accident or hospitalisation insurance and death coverage for you and your family. Your broker will explain all of the possibilities in detail.
G - Group insurance
Are you an employee and do you have group insurance through your employer? There is a good chance that your employer will pay part of the premium and you will pay the rest. What you pay is also called a "personal contribution" and may entitle you to a tax benefit.
H - Housing loan
When you take out a home loan or a mortgage, the lending organisation may also ask you to take out outstanding balance insurance and fire insurance. However, you are not required to take out this insurance with the same company or bank which gave you the loan. It is even worthwhile to ask your broker to find the best outstanding balance insurance policy. The reduction you would receive on the rate of your loan if you take out your outstanding balance insurance with the same bank would soon be irrelevant if the outstanding balance insurance is more expensive than elsewhere.
I - Individual Pension Agreement (IPA)
This insurance can only be taken out by self-employed people with a company. The aim is to save for a supplementary pension. The company pays the premiums and can also deduct them as a professional expense (provided that the remuneration is regular and the 80% rule is respected). The self-employed person is the actual beneficiary. This is a very secure solution, as the IPA reserve is protected even in the event of the company's bankruptcy.
J - Just for you
An insurance broker will find the best offer on the market for you. He or she will compare the conditions and rates for different insurers and find the solution which suits you best. This is the main difference with respect to insurance agents: they can only offer products from their own company.
K – Keep your standard of living
Various life insurance products are a perfect solution for building up a supplementary pension. This is an absolute necessity if you want to maintain your standard of living after retirement. There are tailor-made insurance solutions for individuals (pension savings and long-term savings), self-employed people without a company (Private Supplementary Pension for the Self-employed, or PSPS, and Pension Commitment for the Self-employed, or PCS), self-employed people with companies (PSPS and Individual Pension Agreement, or IPA) and companies (group insurance). Finally, there is also the INAMI contract for the medical and paramedical professions. Each solution has its own terms and tax benefits.
L - Long-term savings
Long-term savings allow you to save for your pension in a tax-efficient way, with the maximum premium calculated according to your income. The tax benefit is 30%. The absolute maximum premium is €2,310 (in 2018), which corresponds to a tax benefit of €693.
M - Matrimonial regime
The choice of matrimonial regime will be important for the transfer of your estate. In the event of death, the notary will always look for the applicable matrimonial regime. The inheritance rights will be determined based on this. The matrimonial regime will also have an impact on whether the capital of a life insurance policy is individual or common property. If you have any questions about this, please do not hesitate to contact your broker.
N - New property
Are you self-employed and would like to invest in property? A bullet loan combined with a supplementary pension plan is therefore the ideal solution. A bullet loan consists in borrowing a certain amount of money (e.g. the purchase price for the property or the total cost of the transformation works), and when you receive your supplementary pension plan capital, you repay the entire amount of your bullet loan. In the meantime, you only pay interest.
O - Outstanding balance insurance
When you take out a mortgage, you reimburse a fixed amount each month. But if you suddenly die, the monthly payments will continue to run, with the risk that your partner or loved ones will face some financial difficulties and will no longer be able to pay off the mortgage. To avoid this situation, you can take out an outstanding balance insurance policy which will (partially) cover the payment of premiums upon your death.
Differences in terms of coverage and conditions can be very significant from one insurance company to another. If you have diabetes, some insurers will ask you for an extra premium and others will not (under certain conditions).
P - Private Supplementary Pension for the Self-employed (PSPS)
This is an advantageous supplementary pension solution for the self-employed. A PSPS makes it possible to pay less tax and less social contributions. You have the choice between two formulas:
- the classic PSPS: you can pay up to 8.17% of your net taxable professional income, with an absolute maximum of 3,187.04 euros (in 2018).
- socialPSPS: you can pay up to 9.40% of your net taxable professional income, with an absolute maximum of €3,666.85 (in 2018). You also benefit from some additional guarantees, such as disability and death coverage.
Q - Medical questionnaire
If you wish to take out a life insurance policy, often your insurer will assess your health first with a few short questions or a more elaborate questionnaire. The insurer may also sometimes ask you to have a medical check-up. Your medical data will be treated with the greatest discretion by the insurer and will be used to determine the right rate and conditions.
R - Receiving your capital
When you conclude an insurance contract in order to save money, a maturity date is often set. This is the date on which the capital saved will be paid out. This does not apply in the case of a supplementary pension. In this case, the capital can only be paid at the statutory pension age or if you meet the conditions for an early statutory pension. This rule applies to all second pillar pensions, such as PSPS, IPA, PCS, INAMI contracts and group insurance.
S - Solution for health professionals
If you work in a medical or paramedical profession, you receive an annual allowance with an INAMI contract. This allowance provides you with a supplementary pension and/or protects you against the financial consequences of work incapacity or death. This is possible with an INAMI contract, which is a tailor-made insurance solution for health professionals.
T - Transferring your estate
Insurance products allow you to pass on (part of) your estate to the next generation in a tax-efficient way. The exact choice of the contract beneficiary is a crucial element in this case. Your broker will discuss your wishes with you and then propose a tailor-made solution, with the aim of reducing the inheritance tax as much as possible.
U – U choose
A group insurance policy provides a supplementary pension for the employees of a company. Additional benefits may still be provided in this case, such as work incapacity or death coverage. Some group insurance policies allow workers to choose the benefits themselves. This is referred to as a cafeteria plan.
V - Entrepreneurs' Valhalla
If you own a company with partners, it is important to protect the partnership from the consequences of the death of one of the partners. This may not only compromise the financial stability of your company, but may also lead to many discussions on shareholding. Finally, compensation for heirs may also cost a significant amount of money. You can avoid all of these problems and questions for your company thanks to a quality death insurance policy for partners.
W - Worry-free work incapacity
If you are unable to work as a self-employed person due to illness or an accident, you will receive social security benefits, which do not amount to much. Your fixed costs will remain the same, while your income will suddenly be much lower. It is therefore better to take out guaranteed income insurance in order to protect yourself against any financial worries. You will then receive a monthly amount in the event of work incapacity and may deduct the premiums as a professional expense.
X - X Factor
The talent war certainly does not make it easy for companies to attract and retain the best talent. Group insurance can certainly be an important motivation in this case and can be a company's X factor. A group insurance policy allows you to save for a supplementary pension and to benefit from additional guarantees through your employer. A group insurance policy also pays much more than a similar increase in net salary.
Y - Generation Y
Term used to describe people born roughly between 1980 and 1990. This generation seeks a lot of information before buying something and often compares offers from several companies. This also applies to insurance. Fortunately, you do not have to find everything yourself and can use a broker who will examine the market offer and make you a tailor-made proposal. Generation Y also has a perfect command of digital applications, which is an additional advantage for some brokers and insurers. You can access your insurance portfolio and request changes online, use all kinds of useful applications, etc.
Z - Zen
If you wish to invest in life insurance - which of course has its advantages - your broker will first help you to determine your investor profile. This profile will provide an indication of the best and most suitable insurance products for you. This profile will take into account not only your financial situation, but also your risk profile, your knowledge of financial products, etc.
A life insurance at NN offers you many benefits: discover them here.
