Cancelling funeral expense insurance: Avoid financial pitfalls and use smart alternatives
16.04.25
9
Minutes
Katrin Straub
Managing Director at nextsure
Are you considering cancelling your funeral insurance? This step can often be associated with financial disadvantages that can significantly reduce the surrender value. Find out what pitfalls await and which alternatives can secure up to one hundred per cent of your capital.
The topic in brief and concise terms
Cancelling the funeral expenses insurance is usually associated with financial losses; the surrender value is often well below the contributions paid in.
Options such as premium suspension, payment deferral or reducing premiums are often more advantageous than cancellation and can partially preserve insurance cover.
Termination must be in writing and in compliance with the contractual notice periods; advice can help to find the best individual solution.
Optimising the decision to resign: understanding the financial realities
Many policyholders consider cancelling their funeral insurance. Financial pressures are often the main reason for this consideration. However, cancellation usually results in a surrender value that is lower than the total amount of premiums paid.
In the first few years of the contract, the surrender value may even be close to zero. This is due to the initial acquisition and administration costs that are offset. Losses of thirty to fifty per cent are not uncommon. Before you cancel your funeral insurance, all options should be reviewed. A careful analysis could save you several hundred euros.
Quick Facts: Cancelling funeral insurance at a glance
Here are the key points regarding the cancellation of a funeral insurance policy:
Cancellation is usually possible monthly or at the end of the insurance period.
The surrender value paid out is often lower than the premiums paid in.
Written cancellation with a signature is absolutely required.
Alternatives such as premium-free continuation can prevent financial losses of up to one hundred per cent.
Withdrawal is possible within thirty days of receiving the policy document.
These facts show that cancellation must be carefully considered. There are often better ways than terminating the contract prematurely.
Practical case of dismissal: a calculation example of possible losses
Imagine you have paid fifty euros a month into your funeral insurance policy for five years. That amounts to a total contribution of three thousand euros. If you cancelled after this period, the surrender value could, for example, be only one thousand five hundred euros.
This loss of fifty per cent is a realistic scenario. The difference of one thousand five hundred euros arises from arrangement costs and risk contributions. An alternative such as premium-free cover would at least have secured capital preservation to some extent. This example illustrates the financial disadvantages of cancelling too early.
Alternatives to cancellation: Better options for your pension provision
Before cancelling your funeral insurance policy, consider alternatives. Paid-up insurance is often the first choice. You no longer pay premiums, and the insurance cover continues in a reduced form. This is usually possible once a minimum accumulated sum of, for example, five hundred euros has been reached.
Other options include:
Premium deferral: In the event of short-term financial difficulties, premiums can be suspended for a few months. Repayment is made later, often within 24 months.
Premium reduction: Reduce the sum insured and thus your monthly premiums. This leaves basic cover in place.
Sale of the policy: For higher surrender values (often from ten thousand euros), selling may generate more than cancelling the policy.
Policy loan: Use your policy as collateral to obtain liquid funds without cancelling the contract.
Our expert tip: Speak to your insurer about these options. An affordable funeral insurance policy from the outset often avoids such considerations. Cancelling should always be the last resort, as it is usually associated with losses of more than twenty percent.
Expert knowledge: Legal basics and key deadlines for termination
Termination of a funeral insurance policy is subject to certain legal framework conditions. The German Insurance Contract Act (VVG), in particular Section 169, governs the entitlement to the surrender value. This must be calculated in accordance with recognised actuarial principles. The termination itself must be made in writing, i.e. by letter, fax or sometimes also by e-mail, and bear your signature.
The notice periods are set out in your contract. It is customary to terminate at the end of the current insurance period, which is often monthly. If premiums are paid annually, termination may also only be possible on an annual basis. Please note the notice period, which is usually one month. Cancellation of the contract is possible within thirty days of receiving the policy document without giving reasons. Our expert tip: send the cancellation by registered mail with acknowledgment of receipt so that you have proof of delivery; this costs around five euros extra.
Special case social welfare office: Can termination be demanded?
It sometimes happens that the social welfare office becomes aware of a funeral benefit insurance policy when benefits are applied for. In principle, the social welfare office may not simply demand that a funeral benefit insurance policy be cancelled across the board. The key factor here is whether the sum insured is reasonable. Courts have already ruled several times in favour of policyholders where the provision does not exceed a customary amount, for example five thousand euros.
An appropriate funeral benefit insurance policy is regarded as protected assets. This serves to ensure a dignified funeral. If the social welfare office nevertheless insists on cancellation, legal advice or contacting consumer advice centres is advisable. They can help find a solution in more than eighty per cent of cases. Also find out whether your funeral benefit insurance is tax-deductible.
The cancellation of a funeral expenses insurance policy is a significant decision with financial consequences. As the examples show, losses can amount to up to fifty per cent of the capital paid in. A careful weighing up of the options and review of all alternatives is therefore essential. Every situation is individual and requires a tailored solution.
Our mission at nextsure is to offer you transparent and easy-to-understand insurance solutions. We help you make the right decision for you. Professional advice can help you save several hundred euros. Use our expertise to shape your financial future in the best possible way. Remember that a well-chosen funeral expenses insurance policy can help avoid such difficult decisions from the outset.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete recommendations for optimisation.
More useful links
Wikipedia offers comprehensive information on funeral expense insurance.
Statista provides forecasts on ownership of funeral expense insurance in Germany.
Statista provides data on average funeral costs in Germany.
The Verbraucherzentrale offers advice on whether funeral expense insurance is worthwhile.
test.de (Stiftung Warentest) compares various funeral expense insurance policies.
The Deutsche Rentenversicherung provides information on survivor pensions.
Destatis (Statistisches Bundesamt) provides information on demographic change in Germany.
FAQ
How do I cancel my funeral insurance correctly?
Cancellation must be made in writing (by letter, fax or email) and signed by the policyholder. Please state your policy number and the desired cancellation date. Sending it by registered post is recommended.
What happens to my money if I cancel?
You will receive the surrender value paid out. This value is usually lower than your contributions, especially in the first few years, as initial and administrative costs are deducted.
What are the disadvantages of cancelling a funeral insurance policy?
The biggest disadvantage is financial losses due to a low surrender value. In addition, insurance cover for your dependants ceases, meaning they then have to bear the full funeral costs themselves, which can quickly exceed four thousand euros.
What is a premium-free policy and is it better than cancelling?
If your policy is made paid-up, you no longer pay premiums, but reduced cover remains in place. This is usually more advantageous than cancelling the policy, as capital already accumulated is retained and can continue to earn interest, thereby avoiding losses of up to one hundred per cent.
Can the social welfare office force me to cancel my funeral insurance?
No, generally not, provided the insured sum is reasonable (e.g. up to around five thousand euros). An appropriate funeral benefit insurance policy counts as protected assets.
Should I cancel my funeral insurance if I urgently need the money?
Cancellation should be the last resort. First, consider alternatives such as deferring contributions, reducing contributions, or taking out a policy loan. These options can give you financial flexibility without terminating the contract at a significant loss.
