Value Instead of Switching: Why You Shouldn't Change Your Old Insurance Policies
06/04/25
3
Minutes
Katrin Straub
Managing Director at nextsure
Are you considering modernising your old insurance policies? Often, it is wiser not to change old insurance contracts. Discover why legacy policies can be real treasures and how you can make use of their benefits.
The topic in brief and concise terms
Old insurance policies, especially those taken out before 2005 or 2008, often offer unbeatable guaranteed interest rates and favourable terms that are lost if you switch.
Tax advantages, especially for life insurance policies taken out before 2005, can be lost through cancellation or changes.
A renewed health assessment for personal insurance policies (e.g. BU) when switching can lead to higher premiums or exclusions.
Hidden Treasures: Recognising the Indispensable Benefits of Legacy Contracts
Older insurance contracts can be of considerable value. Many policies taken out before 2005 offer a guaranteed interest rate of up to four per cent.
A hasty switch can wipe out this advantage. Some older contracts also cover natural hazards, which are now hardly insurable.
The 2008 VVG reform brought changes to obligations. Contracts before this reform, if not amended, are more customer-friendly.
In the case of gross negligence, there is then not always a complete loss of benefits. A switch can weaken this favourable position.
In particular, life insurance policies taken out before 2005 benefit from tax privileges on payout. Cancellation or amendment jeopardises these tax advantages.
It is often advisable to make older policies paid-up rather than give them up. These aspects illustrate why a careful review is essential before any decision is made.
Securing Capital Preservation: Why Older Life Insurance Policies Are Often Unbeatable
Older endowment life insurance policies are often worth their weight in gold. Policies from the 1990s offer a guaranteed interest rate of four per cent.
New policies today often offer only one per cent or less. The compound interest effect over decades is an enormous factor here.
Another point is tax exemption for contracts taken out before 2005. Returns are tax-free if the twelve-year term is met.
Cancelling a private pension insurance policy can lead to unexpected tax liabilities. This also applies to life insurance policies.
Profit-sharing bonuses were often more generous with older policies. Older policies can sometimes benefit more, even without a guarantee.
Switching means losing these rights built up over the years. A detailed analysis of the contract terms is therefore crucial before cancellation.
Optimising occupational disability cover: Making use of the strengths of older BU policies
When it comes to occupational disability insurance (BU), caution is advised. Older policies may include more favourable occupational group classifications.
A switch could lead to higher premiums. The medical underwriting check is another critical point.
As you get older, a new medical underwriting check becomes riskier. The old contract was taken out based on your health status at that time.
This cover is often irreplaceable. Cancelling the BU should be the last resort.
Some older policies have less stringent referral clauses. The insurer can less often refer you to another occupation.
A new policy could come with worse terms here. A careful review of the terms is necessary before any decision is made.
The following five points often argue in favour of keeping an old BU policy:
Lower premiums due to the earlier medical underwriting and occupational classification.
No repeat medical underwriting, with the risk of exclusions or premium loadings.
Potentially better terms, e.g. with abstract referral (now less common).
Rights already acquired and policy terms already established.
Protection against later changes in the law that could affect new customers.
These five advantages can tip the balance in favour of not changing old insurance contracts.
Avoid Legal Pitfalls: What You Need to Know About Contract Changes
The Insurance Contract Act (VVG) was reformed in 2008. Contracts from before then, if not amended, are more favourable for policyholders.
This applies in particular to provisions on breaches of policyholder obligations. An ill-considered change can wipe out these advantages.
Insurers are not allowed to change contracts without the customer’s consent. Offers to switch cover should be examined critically.
Often, the insurer’s aim is to convert the contract to new terms that are more favourable to it. A change to the beneficiary designation is usually unproblematic. However, fundamental contractual changes are sensitive.
Our expert tip: Do not let yourself be put under pressure. Advisers must provide comprehensive information about the disadvantages of cancellation.
This includes the loss of guaranteed interest rates or tax advantages. Careful consideration is crucial here.
Bear these five points in mind before considering a contract amendment:
Comparison of guaranteed benefits: Older contracts often offer higher guaranteed interest rates.
Tax aspects: Contracts taken out before 2005 in particular may have tax advantages on payout.
Medical examination: In life insurance, a new medical examination is often disadvantageous.
Terms and conditions: Older terms may in individual cases be more customer-friendly, e.g. with regard to policyholder obligations.
Cost structure: New contracts may have higher acquisition and administration costs.
These five considerations show how important a sound basis for decision-making is.
Planning Long-Term Security: When an Adjustment Can Make Sense
Although often advisable, there are exceptions. A change in life circumstances may require adjustments.
Starting a family or buying property are examples of this. Sometimes the old cover is simply insufficient, for example if the sum insured in liability insurance is too low.
In property insurance such as household contents, newer tariffs can offer better benefits. Premiums have often also become cheaper here.
It can be worth comparing options. But caution: do not cancel too hastily before the new cover is in place.
Our expert tip: check whether it is possible to supplement the old contract. An additional insurance policy is often better.
Professional advice, such as that offered by nextsure, creates clarity. Your tax aspects will be taken into account.
This way, you can find the optimal strategy for your protection.
Your Path to Optimal Protection: Options for Action and Expert Advice
Not changing old insurance contracts is based on solid advantages. Three or four per cent guaranteed interest is unbeatable.
Tax advantages, especially for policies taken out before 2005, also carry significant weight. Such benefits are rare.
Before you touch a policy, you should take a close look at the details. What guarantees does your contract actually include?
What are the current terms? A dynamic clause in an old contract can make sense.
This helps to preserve the value of your policy over the years.
An independent analysis of your situation is the first step. At nextsure, we help you separate the wheat from the chaff.
We review your existing contracts and show you which policies you should definitely keep. Often, a combination of old and new is the best solution.
Request your personalised risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for optimisation.
More useful links
The German Insurance Association (GDV) provides facts and figures on insurance coverage in Germany for 2022.
The Deutsche Bundesbank provides its financial stability reports, which offer insights into the stability of the German financial system.
The Federal Ministry of Finance provides information on financial market stability and relevant policy measures.
FAQ
What makes old insurance contracts so valuable?
Old insurance policies are often characterised by high guaranteed interest rates (e.g. four per cent for policies from the 1990s), tax advantages (especially if taken out before 2005) and potentially more favourable terms (e.g. regarding obligations before the 2008 VVG reform).
Should I change my occupational disability insurance if it is already old?
Usually not. Older disability insurance policies were often taken out on more favourable health terms and occupational class ratings. Switching requires a new medical underwriting assessment, which can lead to higher premiums or exclusions.
What happens to my tax benefits if I change an old life insurance policy?
If you significantly change or cancel a life insurance policy taken out before 2005, the originally guaranteed tax exemptions on the returns may be lost. Any change should therefore be carefully reviewed for tax implications.
My insurer is offering to convert my old contract into a new, 'more modern' one. Should I do it?
Be careful. Insurers often try to use this to get rid of old policies with terms unfavourable to them (high guarantees). A new policy usually has lower guarantees and is subject to current terms, which are not always better. Have the offer reviewed independently.
When might it still make sense to amend an old contract?
An adjustment can make sense if your life circumstances have changed drastically (e.g. a significantly greater need for cover) and the existing policy does not cover this. Even with pure property insurance, newer tariffs can sometimes offer better benefits at lower prices. However, cancellation should always be the last resort.
How can nextsure help me with my old insurance contracts?
nextsure offers a free, personalised risk analysis. Our experts review your existing legacy contracts, show you their strengths and weaknesses, and provide specific suggestions for optimisation so that you do not give away any valuable benefits.
