Why take out life insurance?
You often hear the term ‘life insurance’, but do you know what it actually entails? Well, we can tell you now that it’s more than just death cover. It’s a smart way to provide financial protection to your family, to prepare for your future or to grow your savings.
On this page, you will discover what exactly life insurance is, what types of policy exist and when they are a good idea for you or your family. Having this information equips you to make the right choice. Read on and find out more.
What is life insurance – and why should you take it out?
Life insurance is a type of insurance that provides financial protection to you or your family further down the line. It is actually a generic term for different types of insurance. Some policies pay out when you die, others at an agreed time while you’re alive.
Many people confuse life insurance with non-life insurance. However, there is a clear difference between the two:
- Life insurance provides financial protection in the event of death or at a pre-agreed time, such as retirement
- Non-life insurance covers damage, harm or injury to other people or to property (for example, family insurance or home insurance)
Types of life insurance
There are various types of life insurance product:
- Life insurance (death cover):
- KBC Life Insurance
- KBC Funeral Insurance
- Savings-linked and investment-type life insurance:
- life insurance (class 21) savings product
- unit-linked (class 23) life insurance product
Life insurance (death cover)
This type of insurance is a term life insurance policy that pays an agreed amount to your next of kin should you die during the term of the contract. This ensures you provide them with some financial relief at a very difficult time.
For example: you pay a premium of 100 euros. Should you die the day after paying it, your next of kin will receive the full sum insured.
A unexpected death often means a sudden loss of income. This has many consequences for those left behind as costs still have to be met (energy bills, children's studies, inheritance tax, etc.). Life insurance ensures that your family or loved ones are able to cope with that financial blow.
The premium depends on the amount you want to leave to your loved ones under the insurance policy. Other factors also have an impact on the size of the premium, such as your age and your state of health.
Well, funeral insurance is a type of death cover. You can think of it as three layers, where ‘life insurance’ is the most overarching term and ‘funeral insurance’ the most specific.
Life insurance and funeral insurance policies are triggered when you die, but have different purposes. As its name suggests, funeral insurance covers primarily the cost of your funeral or cremation. That’s not an unnecessary luxury either when you realise that the average cost of a funeral in Belgium is currently around 7 000 euros.
Funeral insurance
- Covers the cost of your funeral or cremation
- Provides life-long cover (until death)
- How much you insure is up to you
- The benefit is guaranteed
- Provides financial peace of mind for your loved ones
Life insurance (death cover)
- Temporary financial protection for next of kin
- Ability to choose term (but there must be an end date)
- Decide who receives this sum after your death
- Benefit paid in the event of death during the term
What are the main exclusions under a life insurance or funeral insurance policy?
- Death of the insured by suicide in the first year of the contract (euthanasia according to the legal provisions is, however, not an exclusion)
- Death of the insured as a consequence of an act of violence or active participation in events of war
- If the insured dies beyond the term of the life insurance policy
Savings-linked and investment-type life insurance: return on your capital
You can save or invest for the long term thanks to two life insurance products. They help you grow your savings (with or without capital protection). We explain how they work, what they cost and when it’s a good idea to take them out.
life insurance (class 21) savings product
life insurance (class 21) savings product (sometimes called ‘Class 21’ or savings-linked insurance) provides a safe way to save for the medium or long term. You receive a guaranteed return and you also have the potential to earn an annual profit share.
- You can start saving from as little as 10 euros a month
- You get a fixed return on each deposit until the end of your contract
- You may also receive an additional profit share, depending on the economy and the performance of KBC Insurance NV
For most products, you pay:
- A one-off insurance tax of 2%
- An entry charge of 5%
- No management fees
- No withholding tax
(unless you withdraw money from a non-tax-efficient product within the first eight years)
Bonus: it is also tax-efficient!
unit-linked (class 23) life insurance product
This product (sometimes referred to as ‘Class 23’ or investment-type insurance) combines life insurance with an investment in one or more funds. These funds invest primarily in shares, bonds, cash, real estate or a combination of these assets.
- You want a potentially higher return
- You want to decide who receives your death benefit
- You want to plan your inheritance the smart way
- You want tax diversification in your assets
For most investment-type insurance products, you pay:
- An entry charge
- An annual management fee
- A one-off insurance tax of 2%
Depending on the type of unit-linked product you choose, you can start investing from as little as 25 euros a month. Unlike many other investments, you don’t pay withholding tax on the income from these types of product under the current tax system (unless investment funds are involved that have a (partial) capital protection mechanism).
Why take out life insurance?
Life insurance provides more than just protection in the event of death. It is also suitable for:
1. Inheritance planning
- Assets quickly made available after death
- Alternative to a will (beneficiary designation)
- Save on inheritance tax through Generation Skipping
- If you die and leave your assets to several people (e.g., grandchildren) via a life insurance (Class 21) savings product or unit-linked (Class 23) life insurance product:
- a larger proportion of your assets will fall into the lower tax brackets, resulting in savings
- in many cases, the recipients will also benefit from a lower rate of inheritance tax
- If you die and leave your assets to several people (e.g., grandchildren) via a life insurance (Class 21) savings product or unit-linked (Class 23) life insurance product:
- Gifting while retaining control of assets
- You will then only be liable for gift tax, which is lower than inheritance tax.
- A controlled asset transfer (via a life insurance policy) leaves you with plenty of say in what happens to your asset. You will retain this control over the contract and the beneficiary for as long as you live.
2. Pension accumulation
- A long-term nest egg
- Tax relief through a pension savings scheme or long-term savings plan
- Up to 30% in tax relief
- A maximum of 337.50 euros per year for pension savings schemes
- A maximum of 759 euros per year for long-term savings plans
3. Return on your savings
- Guaranteed rate for ‘Class-21’ life insurance contracts
- Potentially higher returns for ‘Class-23’ life insurance contracts (with risk)
4. Protection for your loved ones
- Financial security for your partner or children should you die
If you have any questions about life insurance,
feel free to drop by one of our branches, contact your insurance agent or call KBC Live on 078 353 137.
If you have any questions about life insurance,
please feel free to drop by one of our branches, get in touch with KBC Live or contact your insurance agent.
Good to know
- KBC Life Insurance is a type of term insurance (class 21)
- The term can be freely determined, but may not be less than one year
- The latest possible date on which the contract can end is the 75th birthday of the insured
- You decide on the amount to insure (the minimum amount is 5 000 euros)
- You can pay a single premium or opt for payment of a monthly or annual risk premium (in that case the premium changes in line with the age of the insured)
- Medical acceptance depends on the insured death benefit and your age
- Following a notification of death, your next of kin can engage the services of our Estates department
- Individuals residing in Belgium pay an insurance tax of 2% on each additional amount deposited
- In principle, inheritance tax is payable on KBC Life Insurance
- KBC Funeral Insurance is a life insurance (class 21) savings product
- Term: life-long. The sum insured will be paid out when the insured dies, regardless of when this occurs
- KBC Funeral Insurance is subject to medical acceptance on the basis of a short medical statement (the insured must be younger than 76 years of age at the time the insurance is taken out)
- KBC Life Insurance and KBC Funeral Insurance are governed by the laws of Belgium.
- Future tax treatment may change, and depends on your individual circumstances. Your KBC Insurance intermediary will be happy to give you bespoke advice in this respect.
- Your intermediary is the first point of contact for any complaints you may have. If no agreement can be reached, please contact KBC Complaints Management, Brusselsesteenweg 100, 3000 Leuven, complaints@kbc.be, tel. 016 43 25 94, fax: + 32 16 86 30 38. If you cannot find a suitable solution, you can contact the Belgian insurance industry's ombudsman service: Ombudsman van de Verzekeringen, de Meeûssquare 35, 1000 Brussels, info@ombudsman-insurance.be, www.ombudsman-insurance.be. This does not affect your legal rights
- KBC Funeral Insurance and KBC Life Insurance are products provided by KBC Insurance NV – Professor Roger Van Overstraetenplein 2 – 3000 Leuven – Belgium
VAT BE 0403.552.563 – RLP Leuven – IBAN BE43 7300 0420 0601 – BIC KREDBEBB
Company licensed by the National Bank of Belgium, de Berlaimontlaan 14, 1000 Brussels, Belgium, for all classes of insurance under code 0014 (Royal Decree of 4 July 1979, Belgian Official Gazette of 14 July 1979). Member of the KBC Group
