What is cross over life insurance?
Cross term life insurance is a special type of life insurance that couples, business partners or cohabiting couples can use to insure each other. Sometimes this form of insurance is also called mutual term life insurance.
The major benefit of cross-insurance is the ability to avoid Germany's inheritance tax. When you cross insure someone, you're agreeing to name them as the policyholder of your life insurance policy. You will continue to be the primary insured and pay the monthly premiums, however, the newly cross insured will no longer be considered just a beneficiary of the policy. Instead, they will be considered the new policyholder. This change in 'status' as a beneficiary has the advantage that the sum insured is not treated as an inheritance, but as a tax-free contractual benefit.
By comparison, with a normal partner term life insurance policy, each person would insure their own life and register their partner as the beneficiary. However, because the beneficiary in the event of death is not also the policyholder, inheritance tax is payable when the sum insured is paid out.
For who does cross insurance make sense?
It is particularly worthwhile for unmarried couples to take out crossover term life insurance. This is because mutual term life insurance allows you to avoid inheritance tax, which is normally payable when the death benefit is paid out. The tax-free amount for couples without a marriage certificate or registered civil partnership is €20,000.
In comparison: If the partners are married, an allowance of €500,000 applies (as of July 2023). Anything above the tax-free amount must be taxed. For this reason, crossover insurance can also make sense for married couples who have already used up their tax-free allowance through a property or other assets.
How do I set up cross insurance with Feather?
Setting up cross insurance for your Feather term life insurance is easy and can be done by submitting a request form! We'll need to know basic information about the two parties involved, photo ID, and then a signature from each to confirm the changes. That's it!
Please note: You will need explicit approval from the newly cross insured to undo this change after it's been made.
Feel free to reach out to our support team should you have additional questions.