Reflection: Not everyone needs to be insured in case of death. It is not always necessary to insure the family breadwinner against death.

A slightly controversial topic, coming from an “insurance guy.”

Expenses Come First!

There is no point in setting up life insurance without knowing your essential monthly expenses!

It doesn’t matter whether you write your expenses down on paper, in Excel, or use a mobile app (for example, the Czech app Wallet by BudgetBakers works very well).

We are looking for the amount of your ESSENTIAL MONTHLY EXPENSES. And don’t forget about expenses paid once a year: children’s extracurricular activities, annually paid insurance, public transport passes, car service, inspection, property tax, etc. It’s up to you how detailed you want to be.

Got it? Excellent. We can begin:

What will your situation look like in case of the death of one spouse?

For the calculation, we will use 90% of your essential monthly expenses plus the surviving spouse’s income. We will add widow(er)’s pension and orphan’s pension(s).

For the calculations, we will use the projected old-age pension of the deceased from the ČSSZ (Czech Social Security Administration) website.

• The widow(er)’s pension is 50% of the future pension of the deceased plus a base of 4,040 Kč (161.6 €).

• The orphan’s pension is 40% plus a base amount.

ČSSZ link: https://eportal.cssz.cz/web/portal/informativni-duchodova-aplikace#/

How do you stand? Does it add up?

Can you cover the expenses? Congratulations, then you don’t need life insurance (unless you personally want to leave your family some extra money).

If it doesn’t add up…

We need loan insurance to get rid of monthly installments. I mean: mortgages, consumer loans, leasing, but also family loans!

We gradually add insurance for those loans whose installments burden you the most. The insured amount will decrease in line with your outstanding loan balances. Sometimes it is enough to insure only part of the liabilities – maybe just one consumer loan.

Still doesn’t add up? Even after deducting loan payments? That is something we won’t solve here today – each of us is different. We need to meet and jointly find a solution that makes sense to you and fits your situation.

Example: If the husband, who earned 100,000 Kč (4,000 €) per month, dies.

Example: If the partner, who earned 100,000 Kč (4,000 €) per month, dies.

So get married!

For couples who live as a family, have children, but are not married – marriage may be the solution. (Sorry, but that’s the reality.)

Children are always entitled to an orphan’s pension after the deceased parent! (and they should hope that dad wasn’t too “creative” with his tax returns, otherwise they may get only the minimum pension of 4,810 Kč (192.4 €)).

Widow(er)’s pensions must be applied for! They are not automatic.

If you don’t have children, the surviving spouse is entitled to a widow(er)’s pension only for one year!

If you have minor children or students in regular study up to the age of 26, you are entitled to a widow(er)’s pension until they reach adulthood or complete their studies! (for students, this often serves as a decent motivation to finish school – similar to alimony).

Let’s not forget that we are also insured by the state! That is why it is important to have your records in order at the Social Security Administration.

Next time, we will look at disability, which is the second biggest risk most of us face. Right after liability…

Note: All conversions from CZK (Kč) to EUR (€) were made using a fixed rate of 25 Kč = 1 €.