Life Insurance
Life insurance (henkivakuutus) is an insurance contract under which the insurance company pays an agreed sum upon the death of the insured person. It is an important financial safety tool that helps the family cope with the financial consequences of death. The existence of life insurance is usually determined during the estate inventory.
Claiming the Benefit
Claiming the insurance benefit begins with a notification to the insurance company. The application is accompanied by the death certificate and necessary identification documents. A named beneficiary applies for the benefit themselves, and it is paid directly to them — the benefit is not part of the estate's assets. If no beneficiary is named, the benefit is paid to the estate.
Taxation
The taxation of a life insurance benefit depends on the beneficiary's relationship to the deceased. For close relatives (spouse, children, grandchildren), 35,000 euros per beneficiary is exempt from inheritance tax. The exceeding amount is taxed according to inheritance taxation. For non-close relatives, the entire benefit is subject to inheritance tax.
Life Insurance and the Estate
A named beneficiary's benefit remains outside the estate, meaning it is not available to the estate's creditors. However, the life insurance is reported in the estate inventory deed. Benefits from group life insurance must also be investigated. More information about the estate's financial matters can be found in our estate inventory article.
Frequently asked questions
How is a life insurance benefit paid after death?
The beneficiary or family must apply for the benefit from the insurance company. The application must include the death certificate and any other required documentation. The benefit is usually paid within a few weeks of application. It is paid to the named beneficiary or to the estate.
How is a life insurance benefit taxed?
For close relatives (spouse, children), 35,000 euros per beneficiary is tax-free. The amount exceeding this is subject to inheritance tax. If the beneficiary is not a close relative, the entire benefit is subject to inheritance tax.
Does a life insurance benefit belong to the estate?
No, if the policy has a named beneficiary. A benefit paid to a named beneficiary is not part of the estate's assets and is not available to creditors. If no beneficiary is named, the benefit is paid to the estate and falls within the scope of inheritance distribution.
Related terms
A legal entity formed by the deceased's assets and liabilities at the time of death.
A tax paid on inheritance. The amount depends on the value of the inheritance and the relationship to the deceased.
A statutory procedure to determine the assets and liabilities of the deceased's estate. Must be held within 3 months of death.
A life insurance policy funded by an employer or trade union that covers employees as a group.
Read also
The estate inventory must be conducted within three months of the deceased's death. Learn about calculating the deadline, consequences, and requesting an extension.
A guide to handling insurance matters after a loved one's death: claiming life insurance, group life insurance, cancelling policies, and Kela benefits.
How are insurance policies handled in an estate inventory? Learn about reporting life insurance benefits, savings insurance, and property insurance in the deed.