Life Insurance and Death in Finland

Types of life insurance in Finland

Life insurance in Finland falls into several categories, each relevant in different ways when a policyholder dies.

Term life insurance (kuolemanvaravakuutus) pays a lump sum to the designated beneficiary upon the insured person's death. This is the most common type and the one most people think of when discussing life insurance. The payout is typically a fixed amount, often ranging from 50,000 to 500,000 euros, and the policy remains in force only during the agreed term.

Group life insurance (ryhmähenkivakuutus) is provided by employers as part of collective agreements. In Finland, most collective labor agreements include group life insurance coverage. Under the employees' group life insurance (TRHV), the amounts depend on the deceased's age and the number of children under 22 and are set in policy terms agreed by the labour market organisations; for deaths in 2026 or later the spouse's share is 5,200–18,600 euros and each child's share 8,400 euros. After death, the employer's HR department or the relevant trade union can provide details about coverage.

Savings and investment life insurance (säästö- ja sijoitusvakuutus) combines insurance with a savings or investment component. Upon death, the accumulated value is paid to the beneficiary. These products have more complex tax treatment than pure life insurance.

Pension insurance (eläkevakuutus) may include a death benefit that pays out if the insured person dies before retirement or during the pension payment period. The terms vary widely between policies.

Mortgage life insurance (lainaturvavakuutus) pays off an outstanding mortgage upon the borrower's death, protecting the surviving family from losing their home.

Beneficiary designation and payout

The beneficiary designation in a life insurance policy determines who receives the payout and how it is treated legally and for tax purposes. Under the Insurance Contracts Act (Vakuutussopimuslaki, 543/1994), the policyholder can name specific beneficiaries at any time.

Common beneficiary designations include:

• "Spouse" (puoliso) – the legally married spouse at the time of death. Note that a former spouse after divorce is not covered.
• "Children" (lapset) – the insured person's biological and adopted children.
• "Relatives" (omaiset) – under section 50 of the Insurance Contracts Act, the spouse and the heirs under the Code of Inheritance. If there are no children or other direct descendants, the spouse receives the payout alone; if there is no spouse, the heirs (e.g. children, or if none, parents or siblings) share it as they would share an inheritance.
• "The estate" (kuolinpesä) – the payout becomes part of the estate.
• A named individual – a specific person identified by name.

The distinction matters enormously. When the payout goes to a named beneficiary, it bypasses the estate entirely. This means it is not subject to the deceased's debts, is not included in the estate inventory for distribution purposes, and is not affected by the terms of a will.

It is advisable to review beneficiary designations regularly, especially after major life events such as marriage, divorce, or the birth of children.

Life insurance and the estate

The relationship between life insurance and estate administration is important to understand.

When the beneficiary designation is "the estate," the insurance payout becomes an asset of the estate. It is then distributed according to the will or the statutory order of succession, and it is subject to the estate's debts. Creditors' claims are satisfied before heirs receive their share.

When the payout goes to a named beneficiary, it is treated separately from the estate. However, it must still be reported in the estate inventory deed (perukirja), because it affects the calculation of inheritance tax.

There is an important exception related to the forced share (lakiosa). Under the Code of Inheritance, if a person has taken out a large life insurance policy that effectively circumvents the forced share rights of their direct heirs, the heirs may be able to claim compensation. This is a rare but legally significant situation that arises when insurance payouts are disproportionately large compared to the estate's other assets.

Life insurance proceeds may also interact with the surviving spouse's right to matrimonial property adjustment (tasinko). The calculation of matrimonial assets can be complex when significant insurance payouts are involved, and legal advice is recommended.

Tax treatment of life insurance payouts

The tax treatment depends on who receives the payout. A payout to a close relative is subject to inheritance tax, and a payout to anyone else is taxed as capital income.

You can estimate the inheritance tax with the inheritance tax calculator.

• The former exemption of the first 35,000 euros per beneficiary, and the surviving spouse's additional half-exemption, were abolished on 1 January 2018.
• The entire payout is now taxed according to the inheritance tax scale.
• Example: A spouse receives a 200,000-euro payout. Inheritance tax is calculated on the full 200,000 euros under Tax Class I.

Other beneficiaries – a payout to anyone who is not a close relative in the above sense (for example a sibling, a cohabiting partner or a friend) is taxed as the beneficiary's capital income at 30% (34% on capital income exceeding 30,000 euros a year) and is exempt from inheritance tax.

Group life insurance payouts to close relatives are fully subject to inheritance tax; like other life insurance, they no longer benefit from the 35,000-euro exemption, which was abolished on 1 January 2018.

Practical steps after death

When a person with life insurance dies, the following steps should be taken:

1. Identify all insurance policies – check personal documents, bank records, and contact the deceased's employer. There is no central register of life insurance policies in Finland, so you may need to ask each insurer directly.
2. Notify the insurance company – contact each insurer as soon as possible. Most companies have dedicated claims departments for death benefit claims.
3. Provide required documents – typically a death certificate, the beneficiary's identification, and the policy documents. Some insurers may require the estate inventory deed.
4. Report in estate inventory – all life insurance payouts must be recorded in the estate inventory deed, whether they go to named beneficiaries or to the estate.
5. Inheritance taxation – payouts to close relatives are taxed as inheritance; there is no separate insurance exemption for deaths on or after 1 January 2018.

The insurer must pay at the latest one month after receiving all necessary documentation. A claim must be made within one year of learning of the right to compensation, and in any case within ten years of the death. If there is a dispute about the beneficiary designation or the cause of death, the process may take longer.

For comprehensive guidance on managing the deceased's financial affairs, see our guide on estate administration.