Cancelling funeral insurance: Avoid financial pitfalls and consider smart alternatives
16 Apr 2025
8
Minutes
Katrin Straub
CEO at nextsure
Are you considering cancelling your funeral insurance? This step can often be associated with financial disadvantages that 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 a funeral benefit insurance policy often results in financial losses; the surrender value is frequently considerably lower than the contributions paid.
Alternatives such as contribution exemption, deferral, or reduction can be more advantageous than cancellation in many cases and may partially preserve insurance coverage.
The termination must be done in writing and in compliance with the contractual deadlines; consulting can help find the best individual solution.
Optimising Termination Decisions: Understanding the Financial Realities
Many insured individuals consider cancelling their funeral insurance. Often, financial constraints are the main reason for this consideration. However, cancellation usually results in a surrender value that is lower than the sum of the contributions paid.
In the first years of the contract, the surrender value can even be close to zero. This is due to the initial completion and administration costs that are deducted. Losses of thirty to fifty percent are not uncommon. Before cancelling your funeral insurance, all options should be reviewed. A thorough analysis can save you several hundred euros.
Quick Facts: Termination of 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 paid-out surrender value is often lower than the premiums paid.
A written cancellation with signature is mandatory.
Alternatives like premium exemption can prevent financial losses of up to one hundred percent.
Withdrawal is possible within thirty days of receiving the insurance policy.
These facts show that cancellation must be well considered. There are often better ways than terminating the contract prematurely.
Case Study Termination: An Example Calculation of Possible Losses
Imagine you have been paying fifty euros monthly into your funeral insurance for five years. That corresponds to a total payment of three thousand euros. If you were to cancel after this period, the surrender value might only be one thousand five hundred euros.
This fifty percent loss is a realistic scenario. The difference of one thousand five hundred euros arises from initial costs and risk contributions. An alternative such as a contribution-free arrangement would have at least partially preserved the capital. This example illustrates the financial disadvantages of a hasty cancellation.
Alternatives to Cancellation: Better Options for Your Provision
Before cancelling your funeral insurance, consider alternatives. A contribution waiver is often the first choice. You no longer pay premiums, and the coverage remains in a reduced form. This is usually possible from a minimum accumulated sum of, for example, five hundred euros.
Further options include:
Contribution Deferral: In the case of short-term financial difficulties, payments can be postponed for several months. Repayment usually occurs later, often within 24 months.
Premium Reduction: Reduce the insurance sum and thus your monthly premiums. This way, a basic level of cover is maintained.
Selling the Policy: With higher surrender values (often from ten thousand euros), selling may yield more than cancellation.
Policy Loan: Borrow against your policy to obtain liquid funds without terminating the contract.
Our expert tip: Discuss these options with your insurer. A cost-effective funeral insurance from the beginning often avoids these considerations. Cancellation should always be the last resort, as it usually comes with losses of over twenty percent.
Expert knowledge: Legal foundations and important deadlines for termination
The termination of a funeral insurance policy is subject to certain legal conditions. The Insurance Contract Act (VVG), especially Paragraph 169, governs the entitlement to the surrender value. This must be calculated according to recognised insurance mathematics principles. The termination itself must be made in writing, i.e., by letter, fax, or sometimes email, and must bear your signature.
The notice periods are stipulated in your contract. It is common to terminate the contract at the end of the current insurance period, which is often monthly. With annual payment, it can only be terminated annually. Please note the usual notice period of one month. A cancellation of the contract is possible within thirty days after receiving the insurance policy without providing reasons. Our expert tip: Send the termination via registered mail with return receipt to have proof of delivery; this costs approximately five euros extra.
Special case social welfare office: Can termination be demanded?
Sometimes the social services department becomes aware of a funeral expenses insurance policy when an application for benefits is submitted. Generally, the social services department cannot demand the cancellation of a funeral expenses insurance policy outright. The key consideration here is the appropriateness of the insurance sum. Courts have repeatedly ruled in favour of the insured if the provision does not exceed a common amount, for example, five thousand euros.
An appropriate funeral expenses insurance policy is considered protected assets. This ensures a dignified funeral. If the social services department still insists on a cancellation, seeking legal advice or contacting consumer advice centres is advisable. They can help find a solution in over eighty percent of cases. Also, check whether your funeral expenses insurance is tax deductible.
The path to the right decision: Make use of individual advice
Cancelling a death benefit insurance policy is a significant decision with financial consequences. As the examples show, losses can reach up to fifty percent of the capital paid in. Therefore, careful consideration and examination of all alternatives are essential. Each situation is unique and requires a tailored solution.
Our mission at nextsure is to offer you transparent and comprehensible insurance solutions. We help you make the right decision for yourself. Professional advice can help you save several hundred euros. Use our expertise to strategically plan your financial future. Remember that a well-chosen death benefit insurance can avoid such difficult decisions from the start.
Request an individual risk analysis now: Get your insurance situation checked for free and receive concrete optimisation suggestions.
More useful links
Wikipedia offers comprehensive information on funeral insurance.
Statista provides forecasts on the ownership of funeral insurance in Germany.
Statista provides data on the average funeral costs in Germany.
The Consumer Advice Centre offers advice on whether funeral insurance is worthwhile.
test.de (Stiftung Warentest) compares different funeral insurance policies.
The German Pension Insurance provides information about pensions for survivors.
Destatis (Federal Statistical Office) offers information about demographic changes in Germany.
FAQ
How do I properly terminate my funeral insurance policy?
The cancellation must be made in writing (by letter, fax or email) and signed by the policyholder. Please provide your insurance number and the desired cancellation date. Sending by registered mail is recommended.
What happens to my money when I cancel?
You will receive the surrender value paid out. This value is typically lower than your contributions, especially in the early years, as administrative and closing costs are deducted.
What are the disadvantages of cancelling a funeral expenses insurance?
The biggest disadvantage is financial losses due to a low surrender value. In addition, the insurance cover for your survivors is no longer valid, meaning they will have to bear the full cost of the funeral themselves, which can quickly exceed four thousand euros.
What is a premium exemption and is it better than a cancellation?
With a contribution exemption, you no longer pay contributions, but reduced insurance coverage remains in place. This is usually more advantageous than a cancellation, as the capital already saved is retained and can continue to earn interest, thus avoiding losses of up to one hundred percent.
Can the social services force me to cancel my funeral expense insurance?
No, generally not, as long as the insured sum is appropriate (e.g., up to about five thousand euros). An appropriate funeral insurance policy is considered part of the exempt assets.
Should I cancel my funeral insurance if I urgently need the money?
Termination should be the last option. First, consider alternatives such as deferring the payments, reducing the contributions, or a policy loan. These options can provide you with financial flexibility without cancelling the contract with significant losses.
