Why cancellation often results in wasted money and when a revocation with reversal of the transaction is significantly more beneficial.
You want to terminate your pension insurance, but the offered surrender value is far below the contributions paid in? Termination is rarely the only option, and often not the best one. In many cases, a cancellation followed by a reversal of the contract is more financially advantageous. Rogert & Ulbrich will review your contract and show you which path is right for you.
Why the buyback value is often so low
Anyone who cancels a pension insurance policy receives the surrender value. According to Section 169 of the German Insurance Contract Act (VVG), the insurer owes this amount, but especially in the first few years, it often falls significantly short of the total premiums paid. The main reason for this is the initial setup and distribution costs, which are deducted from the premiums at the start of the contract.
A cancellation fee is often added. However, such a fee is only permissible if it is effectively agreed upon and reasonable. The reimbursement of closing costs is also subject to limits.
The courts have repeatedly criticized opaque clauses regarding cost allocation and cancellation fees, and have recognized a minimum surrender value for certain contract years. Therefore, whether the amount offered to you is calculated correctly is often a question of... Contract interpretation and breaches of duty.
Does the surrender value seem too low to you? Have the calculation checked before you sign anything.
Termination: quick, but usually with a loss
Termination is the most common way to get out of a pension insurance policy. According to Section 168 of the German Insurance Contract Act (VVG), you can terminate the contract with proper notice and then receive the surrender value. The advantage is the quick availability of the money; the disadvantage is the often considerable loss.
Before you cancel, it's worth considering an alternative: a premium waiver according to § 165 of the German Insurance Contract Act (VVG). With this option, the contract remains in effect, but you no longer pay premiums. The accumulated capital is preserved and later paid out as a reduced pension. This way, you avoid the immediate loss due to a low surrender value if you simply want to eliminate the premium burden.
Therefore, cancellation should never be the first, but rather the last step considered. Beforehand, it's essential to determine whether a revocation or a contribution waiver is more advantageous.
Are you considering resigning? First, have it checked whether there is a more financially viable alternative.
The right of withdrawal and the perpetual right of withdrawal
The second option is cancellation. Life and pension insurance policies have a right of cancellation (§ 152 VVG). However, the cancellation period only begins if you have been properly informed about your right of cancellation and have received all the necessary contract documents.
If the cancellation policy was incorrect, the right of cancellation can remain in effect for years after the contract was concluded. In practice, this is referred to as a perpetual right of cancellation. Many contracts from the years of the so-called policy model contain incorrect cancellation policies. However, there are limits: In certain cases, the right of cancellation may be forfeited. Whether cancellation is still possible in your case therefore depends on the specific cancellation policy and the circumstances.
We have been successfully pursuing this consumer protection policy for years, including in the banking and capital market law, where defective cancellation policies are a familiar issue. The same principles can be applied to life and pension insurance policies.
Do you suspect a faulty cancellation policy? Have your documents checked to see if a cancellation is still pending.
Reversal of the transaction: what you will get back
Unlike a simple cancellation, a valid revocation doesn't just give you the surrender value; the contract is reversed. You then generally receive your paid premiums back, less a portion for the insurance coverage you actually received, plus any profits the insurer made from your money.
This usage-based portion can make all the difference. Over many years, it accumulates, so that the cost of reversing the contract can be significantly higher than the repurchase value. However, revocation is not a universally advantageous option. For short contract durations or low usage, the difference may be minimal.
Therefore, before making any decision, it's worth doing a comparative calculation: What are the benefits of the buyback value, and what are the benefits of reversing the transaction? Only then can you assess which option is better for you.
Want to know which is more profitable? Compare the buyback value and the reversal of the transaction.
Cancel or revoke? The comparison
Which path is the right one depends on the individual case. This guide will help:
- Check cancellationThis is advisable if the cancellation policy was flawed. In such cases, reversing the transaction is often cheaper than the repurchase value.
- TerminationThis is the obvious choice if you need quick liquidity and a cancellation is no longer possible. You will then receive the repurchase value.
- Exemption from contributionsSuitable if you only want to get rid of the contribution burden but don't want to lose the contract. The capital remains intact.
- Sale on the secondary marketUnder certain contracts, buyers offer more than the surrender value. Whether this is an option depends on the specific contract.
- Pay attention to taxesIn the case of termination or cancellation, income or benefits may be subject to taxation. You should clarify these consequences beforehand.
It's important to compare all options before making a decision. Once a cancellation has been issued, it usually cannot be reversed.
Are you unsure which option is right for you? Have the options calculated based on your contract.
What you should check before cancellation or revocation
Before making a decision, you should clarify a few points. This checklist will help:
- Secure documents: Compile the insurance policy, terms and conditions, amendments and, most importantly, the cancellation policy.
- Review the cancellation policy: Have it determined whether the instruction was correct and whether a revocation is still possible.
- Calculate the buyback valueCheck whether cost allocation and cancellation deductions are permissible.
- Compare alternativesCompare termination, revocation, exemption from contributions and, if applicable, sale.
- Don't explain anything too hastily.Do not issue a termination notice before the alternatives have been clarified.
This article is part of our series on private pension insurance. We will address points of contention regarding payouts and surpluses in a separate article. An overview of our work can be found in the section... Insurance law.
The sooner you have your options reviewed, the more money you can save. Have your contract evaluated before you cancel.
Rogert & Ulbrich – Your lawyers in insurance law
Rogert & Ulbrich represent policyholders nationwide in disputes concerning the surrender value, termination, and revocation of their pension insurance. Attorney Dario Kovac, who is familiar with insurers' review and rejection strategies from his previous work on the insurers' side, serves as the contact person. We combine this insider knowledge with the firm's consumer protection experience from major cases in banking, capital markets, and automotive law. This allows us to engage with insurers on equal footing.
We review your contract and the cancellation policy, recalculate the surrender value, and compare it to the cost of reversing the transaction. In the case of the Examination and enforcement of claims arising from insurance contracts We represent you out of court and, if necessary, in court. We involve any existing legal expenses insurance early on and obtain the coverage confirmation for you.
Is your buyback value too low or are you considering a cancellation? Get in touch and secure your rights.
