Advantages of Risk Coverage in Classical Life Insurance
Classical life insurance products differ from other financial products in the type of risk coverage and risk equalisation within the insurance company. Classical life insurance covers biometric risks as well as capital yield risks. Guaranteed minimum yields are widespread internationally; they are covered by the choice of a conservative actuarial interest rate, a suitable participation rate by the insured person in their investment income and a restriction to safe investments. The build-up and reduction of valuation and fluctuation reserves and the smoothing function of putting aside revenue reserves suffice to cover the guarantee in the long run. For private households, death insurance is the cheapest way to obtain financial coverage in the case of the death of an income-earning household member. Endowment insurance, on the other hand, is a key instrument for old age provision, providing for the steady accumulation of assets while keeping the capital yield risk low. Annuity insurance is the only tool to cover the risk of longevity.