Life Insurance: How Much Will I Receive?

The amount paid out from a life insurance policy depends on two distinct scenarios: whether the policy is surrendered during your lifetime or whether it is paid out to your beneficiaries in the event of your death.

• In the event of a redemption, only the portion of the gains included in the withdrawal is taxed; the principal is never taxed.
• The formula is: taxable gains = surrender amount × (total gains on the policy / total value of the policy).
• After eight years, an annual deduction of €4,600 (for a single person) or €9,200 (for a couple) applies to the withdrawals.
• Life insurance has been exempted from the increase in social security contributions to 18.6% in 2026, and the rate remains set at 17.2%.
• Upon death, each beneficiary is entitled to a tax exemption of €152,500 on the funds derived from contributions made before age 70.
• A spouse (whether married or in a civil partnership) is fully exempt from tax on the amounts received.

How much will you receive if you cash out a life insurance policy while you're still alive?

The fundamental principle of life insurance is that only the gains are taxed—never the principal, since it comes from income that has already been taxed. In the event of a partial or total surrender, the tax authorities apply a pro-rata rule: each euro withdrawn consists of a portion of principal and a portion of gains, calculated as follows:

Taxable gains = redemption amount × (total gains on the contract / total value of the contract)

Here’s a concrete example: Your contract is worth €65,000, of which €15,000 represents gains that have not yet been taxed. You redeem €10,000. The taxable portion is 10,000 × (15,000 / 65,000) = €2,308. Only this amount is subject to taxation.

For this taxable portion, two different rules apply depending on the length of the contract:

• If withdrawn within eight years, the earnings are subject to a 30% tax (12.8% income tax + 17.2% social security contributions);
• After eight years, an annual deduction of €4,600 (for a single person) or €9,200 (for a couple) applies to the earnings withdrawn, after which they are taxed at a reduced rate of 7.5%.

How much will your beneficiaries receive in the event of your death?

The rules change entirely in the case of a transfer upon death: it is no longer the surrender of the policy that triggers taxation, but rather the payment of the death benefit to the beneficiaries named in the policy provisions.

Premiums paid before age 70

For premiums paid before age 70, each beneficiary is entitled toan individual deduction of €152,500 from the transferred funds (Article 990 I of the General Tax Code). Above this threshold, a flat-rate tax applies: 20% on the portion between €152,500 and €700,000, and 31.25% on the amount above that.

Example: A policyholder contributes €405,000 to a life insurance policy before turning 70 and names two beneficiaries to receive equal shares. Each receives €202,500. After a deduction of €152,500, the taxable portion is €50,000, which is taxed at 20 percent, resulting in €10,000 in taxes.

Premiums paid after age 70

For premiums paid after age 70, the rules change: a flat deduction of €30,500 applies, distributed among all beneficiaries of the policy in proportion to their respective shares. Above that amount, taxation follows the standard inheritance tax schedule based on the degree of kinship.

Factors that affect the final amount

The actual amount received depends on several factors that combine:

• the return on the selected investment vehicles (guaranteed euro-denominated funds at approximately 2.65% net in 2025; non-guaranteed unit-linked funds);
• contract fees ( annual management fees, any entry fees) that reduce net performance over time;
• the number of designated beneficiaries, which automatically increases the available exemption in the event of death (a couple with seven beneficiaries can pass on up to more than two million euros without incurring inheritance tax). 

An accurate estimate of what you will receive depends on your policy, your premium payments, and your personal circumstances. A general calculation is no substitute for an actual simulation. With Raizers, you have access to the Generali life insurance policy, along with guidance to help you build an asset allocation plan that aligns with your goals for policy surrender or estate planning.

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