Term life or endowment life insurance in Germany: what is the difference?
In short
Term life insurance (Risikolebensversicherung) pays only if you die during the term. It has no savings element, costs a 30 year old non-smoker about EUR 9 to 16 a month for EUR 200,000 and ends with no payout if you outlive it. Endowment life insurance (Kapitallebensversicherung) also builds up capital and pays out at maturity, but for the same death benefit it costs thirty times as much or more.
Premiums, rates and cost ratios from published German tariff comparisons and official sources.
Example
Typical range
Term cover EUR 200,000, age 30, non-smoker, 30 year term
about EUR 9 to 16 a month
Term cover EUR 200,000, age 40, non-smoker, 15 year term
about EUR 147 a year for the cheapest recommended tariff
Endowment policy with EUR 200,000 guaranteed sum, 30 year term
roughly EUR 480 to 550 a month
Acquisition costs chargeable against the surrender value
at most 2.5 percent of total premiums, spread over five years
Effective costs in the most expensive quarter of the market
1.9 percentage points a year over 30 years, 3.2 percentage points if stopped after 15 years
Maximum guaranteed interest rate
1.0 percent since 2025, unchanged recommendation for 2026
Guaranteed rates of older policy years
4.0 percent July 1994 to June 2000, 3.25 percent to 2003, 2.75 percent 2004 to 2006, 2.25 percent 2007 to 2011, 0.25 percent 2022 to 2024
Guide values as of September 2026.
Term life premiums come from published tariff comparisons; rates,
cost ratios and lapse figures from the sources listed.
The monthly premium for an endowment policy with a EUR 200,000 guaranteed sum and the end values
in the worked example are our own calculations on the stated assumptions,
so a guide value from quoting practice and not a promise.
We obtain your exact quote.
Worked example
Same monthly budget, two routes: EUR 150 over 30 years
A 30 year old non-smoker has EUR 150 a month to spare and wants the family covered. Route 1 separates protection and investing, route 2 buys an endowment policy.
Route 1: term cover of EUR 200,000 over 30 years
about EUR 13 a month
Route 1: the rest into a broad index fund
EUR 137 a month, EUR 49,320 paid in
Route 1: end value at 5 to 6 percent a year
about EUR 114,000 to 138,000, no guarantee
Route 2: endowment policy at EUR 150 a month
EUR 54,000 paid in, guaranteed sum roughly EUR 55,000 to 62,000
Route 2: maturity value at 2 to 2.5 percent after costs
about EUR 74,000 to 80,000
Route 1 covers EUR 200,000 for 30 years and usually ends with EUR 35,000 to 60,000 more, but carries market risk and can turn out worse in a bad decade. Route 2 guarantees only about a third as a death benefit. Our own calculation on the stated assumptions, not a promise.
The difference in one sentence, then in detail
Term life insurance is pure protection. Your premium covers one year of mortality risk plus administration, nothing else. If you reach the end of the term, the money is gone, but the risk was covered the whole time. That is exactly why it is so cheap.
Endowment life insurance puts both jobs in one contract. Part of the premium carries the death risk, part is saved, part pays acquisition and administration costs (Abschluss- und Verwaltungskosten). It also pays out if you survive the contract. But that sum has to be built up from your own premiums first, and that single fact explains the whole price gap.
Feature
Term life
Endowment life
Pays out
only on death during the term
on death and at maturity
Savings element
none
yes, with a guaranteed rate on the savings part
Premium for EUR 200,000 death benefit
about EUR 9 to 16 a month
roughly EUR 480 to 550 a month
Cost share
small, no capital is managed
acquisition and administration costs across the whole term
Surrender value (Rückkaufswert)
does not exist
often below the premiums paid in the early years
Changing your mind
adjust sum and term, cancel without loss
leaving early costs money
As an investment
not intended as one
not recommended by consumer bodies for years
What the guarantee actually guarantees
The Höchstrechnungszins is the legal ceiling on what a German insurer may guarantee. It has been 1.0 percent since 2025, and the actuarial association recommends leaving it there for 2026. The key point: that rate applies to the savings part only, not to your whole premium. Risk and cost shares come off the top first.
Everything above the guarantee is profit participation (Überschussbeteiligung), and it is non-binding. Insurers set it afresh each year. For 2026 the market average current rate is about 2.6 to 2.9 percent, and with terminal bonuses insurers project a good 3.2 percent. Projected means calculated, not promised. If you treat the figure in a quote as a commitment, you are budgeting money nobody owes you.
Surrender value, costs and the first few years
Acquisition costs land at the start; the savings part only starts to work afterwards. German insurance contract law limits the acquisition costs that may be charged against the surrender value to 2.5 percent of total premiums and requires them to be spread evenly over the first five years. Even so, the surrender value is regularly below what you paid in during the early years.
The supervisor measures this as effective costs (Effektivkosten), the reduction in yield in percentage points per year. In its 2026 review the most expensive quarter of the market showed 1.9 percentage points over the full 30 years, and 3.2 percentage points where the policy was stopped after 15 years. That second case is common: around half of customers with a 30 year contract stop within 15 years. The industry lapse rate runs at roughly 2.7 to 3.5 percent a year, and it adds up.
Tax on maturity depends on the year you signed
For contracts signed up to 31 December 2004, the maturity payout is tax free if the contract ran at least twelve years, premiums were paid for at least five years and a minimum death benefit of 60 percent of total premiums was agreed. That is a genuine advantage that no longer exists for new policies.
For contracts from 1 January 2005, the gain is taxable, meaning payout minus premiums paid. If the contract ran at least twelve years and pays out from age 60, or from 62 for contracts signed from 2012, only half the gain counts, but at your personal income tax rate. Otherwise flat withholding tax (Abgeltungsteuer) applies. The death benefit itself is free of income tax but can trigger inheritance tax (Erbschaftsteuer).
The honest expert view, and where endowment still fits
We will say it plainly, because otherwise you will look it up elsewhere: separating protection from investing is usually cheaper, and German consumer bodies have not recommended endowment life insurance as a savings product for a new policy for years. The reasons are the costs at the front and a guarantee that only works on part of the premium.
Two cases point the other way and deserve respect. Old policies with 3.25 or 4.0 percent guaranteed interest cannot be bought today, and for long-running, tax-privileged policies it is often right to hold on to the end. And if you genuinely do not save otherwise, because the standing order into a brokerage account keeps getting switched off, a contract that simply keeps running beats a good plan you do not follow.
What to do with an old policy
Start with the annual statement (Standmitteilung): year signed, guaranteed rate, surrender value, guaranteed maturity benefit. Those four numbers almost always settle the question. Have the return on the contract calculated independently before you change anything.
Cancelling is the worst of the four options and still the most common one. Selling the policy to a buyer often beats the surrender value, and making it premium free (beitragsfrei stellen) keeps the old guarantee and only stops the payments.
Your situation
What we would do
Signed before July 2000, 4.0 percent guaranteed
keep it running, defer premiums if money is tight
Signed before 2005, twelve years already met
keep it running, the tax exemption is worth a lot
Signed from 2005, premium hurts
make it premium free instead of cancelling
Signed from 2005, you need the money
get a purchase offer and compare it with the surrender value
Only a few years old, surrender value far below premiums
have it calculated first, then decide
Planning a new policy
buy term cover and invest separately, usually cheaper
Step by step
Split the two questions: who needs money if I die, and how do I invest?
Derive the death benefit and term from your actual need and buy plain term life cover for it.
Invest the rest monthly and broadly, with no acquisition commission on your contributions.
For an existing policy, read the year signed, guaranteed rate, surrender value and guaranteed maturity benefit off the annual statement.
Before any cancellation, have the return on the old contract calculated independently and compare keeping it, making it premium free and selling it.
Checklist
Death benefit covers outstanding loans and the family's needs
Year signed and guaranteed rate of the old policy known
Surrender value and guaranteed maturity benefit noted from the statement
Effective costs shown in the quote and compared
Tax rule for the year you signed checked
Beneficiary named in the policy
Common mistakes
Cancelling an old policy with 3.25 or 4.0 percent guaranteed interest
Treating the non-binding profit participation in a quote as a promise
Cancelling in the first years, when the surrender value is below the premiums paid
Bundling death cover and saving into one contract because one contract sounds simpler
Questions and answers
Frequently asked
Which is cheaper, term or endowment life insurance?
For the same death benefit, term life, by a wide margin.
EUR 200,000 of cover costs a 30 year old about EUR 9 to 16 a month.
An endowment policy has to build the same sum from premiums and works out at roughly EUR 480 to
550.
Do I get money back from term life insurance at the end?
No.
If you reach the end of the term, the contract simply ends with no payout.
That is by design and the reason the premium is so low.
Should I cancel my endowment policy?
Usually not without doing the maths.
For contracts before 2005 or with a high guaranteed rate, holding on is often right.
If you need the money, compare a purchase offer with the surrender value and look at making it
premium free.
How is the maturity payout taxed in Germany?
Contracts up to the end of 2004 can be tax free under conditions.
From 2005 the gain is taxable; after twelve years and payout from age 60,
or 62 for contracts from 2012, only half the gain counts, at your personal income tax rate.
What is the profit participation worth?
It is an expectation, not a promise.
For 2026 the market average current rate is about 2.6 to 2.9 percent,
a good 3.2 percent with terminal bonuses.
Only the guaranteed rate on the savings part is certain.
Does my policy documentation come in English?
Rarely.
Terms, the annual statement and any claim correspondence are normally in German,
and the German wording is what counts.
Ask us when a clause is unclear.
When does an endowment policy still make sense?
If you already hold an old one with a high guaranteed rate,
or if you genuinely do not save without a fixed contract.
For a new policy bought as an investment, the costs argue against it.
