Cancel life insurance in GermanySurrender value, alternatives and tax 2026
Before you sign: cancelling is often the most expensive way out of the contract. We show you the surrender value, the better alternatives and what to watch out for with tax and replacement cover.
The key points at a glance
- You can cancel at any time, effective at the end of the current insurance period (§ 168 VVG). With an endowment policy you receive the surrender value (Rückkaufswert, § 169 VVG), which is often below your contributions early on.
- Check the alternatives first: make it paid-up (Beitragsfreistellung, § 165 VVG), an objection (Widerspruch) on old Policenmodell contracts, or a sale on the secondary market.
- A term life insurance (Risikolebensversicherung) has no surrender value. Only cancel it if you genuinely no longer need the cover, because a new contract gets more expensive with age.
- The payout can be taxable (§ 20 EStG), depending on the year of signing and your age. For where your cover stands afterwards, see our life insurance comparison.
Key German terms
Many people cancel their life insurance in an initial frustration over high premiums or meagre returns. Understandable, but cancelling is often the most expensive option: in the early years you often get back far less than you paid in.
Before you end the contract, it pays to take a clear look at the surrender value and the alternatives. If it is only about better or cheaper cover, our guide to switching insurance can also help.
Four ways out of the contract
Cancelling is only one of several options. Depending on the contract and your situation, a different one is often cheaper.
Cancel
You end the contract and, with an endowment policy, receive the surrender value (Rückkaufswert) under § 168 VVG. Quick and straightforward, but especially in the early years often the financially worst route.
Make it paid-up (Beitragsfreistellung, § 165 VVG)
You stop paying in but keep the contract with a reduced sum insured. Makes sense if you simply can no longer afford the premiums but do not want to lose the cover entirely.
Object / withdraw (Widerspruch / Widerruf)
New contracts have a 30-day right of withdrawal (Widerrufsrecht, § 152 VVG). With old Policenmodell contracts from 1994 to 2007 with a faulty notice, an objection (Widerspruch) can even return more than the surrender value (BGH, 07.05.2014). Check eligibility individually.
Sell (secondary market, Zweitmarkt)
Endowment and some annuity (Renten) policies could be sold on the secondary market, often slightly above the surrender value. Important: many buyers have stopped purchasing recently, so check the current availability. Term life insurance (Risikolebensversicherung) cannot be sold.
What does the surrender value pay?
When you cancel an endowment life insurance, the insurer pays the surrender value (Rückkaufswert) under § 169 VVG, that is, the accumulated Deckungskapital (cover capital). The problem: in the early years acquisition costs are offset. These do have to be spread evenly over the first five contract years, but even so the surrender value is often below your contributions at the start.
Worth knowing: the Federal Court of Justice declared intransparent surrender deductions (Stornoabzüge) and the offsetting of acquisition costs invalid, and set a minimum surrender value for contracts from the years 2001 to 2007 (BGH, 25.07.2012). If your policy dates from this period, a review can be worthwhile.
Secure replacement cover first, then cancel
If you still need the survivor protection, take out an affordable term life insurance before cancelling. That way no gap arises.
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Tax on the payout
Whether you have to pay tax on the payout depends mainly on the year the contract was signed (§ 20 Abs. 1 Nr. 6 EStG):
| Contract signed | Taxation of the payout |
|---|---|
| Before 2005 | Generally tax-free with at least 12 years' term and 5 years of premiums. |
| 2005 to 2011 | Gain taxable; only half the gain if the term is 12 years and the payout is made from age 60. |
| From 2012 | As above, but the payout must be made from age 62. |
If you cancel early without meeting these conditions, the gain is taxed in full as capital income. When in doubt, clarify your specific case with a tax adviser.
Cancel or keep? Decision guide
Term life insurance (Risikolebensversicherung)
- No surrender value, you get nothing back.
- Only cancel if the need for cover truly falls away (loan repaid, children provided for).
- If you still need it, secure a cheaper policy first.
Endowment life insurance (Kapitallebensversicherung)
- Request the surrender value and compare it with the alternatives.
- Make it paid-up or check an objection before you cancel.
- In future, keep protection and investment separate.
Consumer advocates recommend having the policy's return reviewed independently before cancelling. If you want to set up your cover afresh, the best first step is to compare term life insurance.
Cancelling as a newcomer or when leaving Germany
Leaving Germany, or signed a policy early that no longer fits? Three pointers.
Leaving the country does not automatically mean cancelling
Many contracts continue from abroad as long as you keep paying the premiums. Before a hasty cancellation, check whether making the policy paid-up (Beitragsfreistellung) is the better choice, to avoid the surrender loss.
Payout and tax in your country of residence
Where a payout is taxed depends on your tax residence and any double taxation agreement. Clarify this before cancelling, ideally with expert advice.
Avoid a protection gap
If you cancel cover you still need, secure the replacement first. Our insurance comparison is also helpful for an overall overview.
Frequently asked questions about cancelling
Can I cancel my life insurance at any time?
If you are still paying premiums, yes: under § 168 VVG you can cancel at any time, effective at the end of the current insurance period, so usually at the end of the policy year or month. There is no fixed minimum notice period for this. The cancellation should be made in writing with the contract number.
How much money do I get when I cancel?
With an endowment life insurance you receive the surrender value (Rückkaufswert) under § 169 VVG. In the early years it is often well below the premiums you paid in, because acquisition costs are offset (Zillmerung, spread over the first five years). A term life insurance has no surrender value, because it does not build up any capital.
Are there better alternatives to cancelling?
Often yes. You can make the policy paid-up (beitragsfrei stellen, § 165 VVG) and keep the reduced sum insured. With old Policenmodell contracts from 1994 to 2007 with a faulty notice, an objection (Widerspruch) can return more than the surrender value. A sale on the secondary market used to be an option, but many buyers have stopped purchasing in the meantime, so check the current availability.
Should I cancel my term life insurance?
Only if you genuinely no longer need the cover. A term life insurance pays nothing back, but a new contract is often more expensive or harder to get at an older age or with changed health. If you still need the survivor protection, secure the replacement first before you cancel.
Do I have to pay tax on the payout?
That depends on the year the contract was signed. Contracts from before 2005 are generally tax-free with at least twelve years’ term and five years of premiums. For contracts from 2005, the gain is taxable; only half of the gain is taxed if the contract ran for at least twelve years and the payout is made from age 60 (contracts from 2012: from age 62) (§ 20 Abs. 1 Nr. 6 EStG).
What is the ongoing right of objection?
For life insurance policies concluded between mid-1994 and the end of 2007 under the Policenmodell, a faulty objection notice can keep the right of objection open (BGH, 07.05.2014). The premiums plus benefits drawn from them then have to be refunded, which can exceed the surrender value. However, the claim is limited and may be time-barred, so it should be checked individually.
Next steps
First check the surrender value and the alternatives. If you still need cover, secure it cheaply before you end the old contract.
More topics: Term life insurance · Insurance switching tips