Life insurance in Switzerland: pillar 3a or 3b, costs and tax
Two products are called life insurance in Switzerland: pure risk death cover, which pays a capital sum only on death, and endowment insurance, which combines savings with death cover. The choice between pillar 3a and 3b determines the tax treatment.
In Switzerland, life insurance is either pure risk death cover (low premium, capital paid only on death, no savings component) or endowment insurance (higher premium, capital paid at maturity or on death). Taken out within pillar 3a, it is deductible from taxable income up to CHF 7,258 in 2026 for an employee affiliated to a pension fund, and up to 20 % of net income with a maximum of CHF 36,288 for a self-employed person without a second pillar. Within pillar 3b it is unrestricted, but deductible only under the flat-rate insurance premium deductions.
What is the difference between pure risk and endowment insurance?
Pure risk cover pays only on death: if the insured person survives to maturity, no benefit is paid and the premiums are spent. Endowment insurance guarantees a capital sum on a fixed date whether the insured is alive or not: part of the premium funds savings, the rest funds death cover.
| Criterion | Pure risk (death) | Endowment (savings + death) |
|---|---|---|
| Indicative monthly premium | Low: tens of CHF | High: hundreds of CHF |
| Capital if insured is alive at maturity | None | Guaranteed capital |
| Savings component | None | Yes, with contractual return |
| Flexibility if money gets tight | Simple cancellation | Surrender usually poor in early years |
| Typical use | Protect a family or a mortgage | Save while guaranteeing dependants |
A widely taught financial planning rule is to separate the two functions: cover the risk with cheap pure risk insurance and save separately through a pillar 3a account or fund.
Pillar 3a or pillar 3b: which one?
Pillar 3a is tied provision: contributions are deductible from taxable income, but the capital is locked until at most five years before the AVS reference age and the order of beneficiaries is set by law. Pillar 3b is free provision: no contribution cap, no lock-in, freely chosen beneficiaries, but no specific federal deduction.
| Criterion | Pillar 3a (tied) | Pillar 3b (free) |
|---|---|---|
| 2026 annual cap, employee with pension fund | CHF 7,258 | No cap |
| 2026 annual cap, self-employed without 2nd pillar | 20 % of net income, max CHF 36,288 | No cap |
| Deduction from taxable income | Yes, in full within the cap | No at federal level |
| Access to capital | Locked, except statutory cases (home purchase, permanent departure, self-employment) | Free under the contract |
| Choice of beneficiaries | Binding statutory order | Free, within forced heirship limits |
| Taxation on withdrawal | Separate one-off tax at a reduced rate | Capital often exempt if statutory conditions are met |
New in 2026: since 1 January 2026, contribution gaps in pillar 3a can be bought back retroactively under conditions. This was not possible before.
How much does life insurance cost in Switzerland?
The premium for pure risk death cover depends on four variables: age at inception, sum insured, policy term and smoker status. For the same sum and term, taking out cover at 30 is structurally cheaper than at 45, because mortality risk rises with age.
- Age: the premium is priced on the probability of death during the policy term.
- Sum insured: size it on real need, typically the mortgage balance plus household costs for the years without the deceased person's income.
- Health questionnaire: unlike LAMal basic insurance, the insurer may ask health questions, exclude risks or decline the application. An inaccurate answer allows the insurer to cancel and refuse the benefit.
- Smoker status: often changes the premium significantly.
Is life insurance tax deductible in Switzerland?
Life insurance held within pillar 3a is fully deductible from taxable income within the annual cap, CHF 7,258 in 2026 with a pension fund and up to CHF 36,288 without. Life insurance in pillar 3b gives no specific federal deduction: it falls only under the flat-rate deductions for insurance premiums, which vary by canton and family situation.
The surrender value of an endowment policy is also subject to wealth tax, unlike pillar 3a capital.
Who actually needs life insurance?
Death cover is justified when the death of one person would lower someone else's standard of living or endanger a property. A single person with no debt and no dependants generally does not need it.
- Couples with children: survivors' pensions from AVS and LPP replace only part of the lost income.
- Homeowners with a mortgage: banks frequently require pledged death cover as security for amortisation.
- Cohabiting partners: the most critical case. Cohabitants are not legal heirs, and LPP survivors' pensions are paid only if the fund's rules allow it and the partner was registered.
- Self-employed people: without a mandatory second pillar, family death cover rests entirely on private provision.
How does the beneficiary clause work?
The beneficiary clause determines who receives the capital on death. In pillar 3b the policyholder names beneficiaries freely; in pillar 3a the order is set by law, spouse or registered partner first, then direct descendants.
Forced heirship shares remain protected: a designation that would harm a protected heir can be reduced. Review the clause after every life event: marriage, birth, divorce or separation.
What happens on cancellation or early surrender?
Pure risk cover is cancelled without any surrender value, since no savings are built up. An endowment policy surrendered in the first years usually returns considerably less than the premiums paid, because acquisition costs are charged at the start of the contract.
Before any surrender, request the current surrender value in writing. Converting to a paid-up policy with reduced capital is often better than surrendering.
Frequently asked questions
What is the difference between pillar 3a and pillar 3b? Pillar 3a is tied provision: contributions are deductible from taxable income, up to CHF 7,258 in 2026 with a pension fund, but capital is locked until at most five years before the AVS reference age and the order of beneficiaries is set by law. Pillar 3b is free provision: no cap, no lock-in, freely chosen beneficiaries, but no specific federal deduction.
How much can you pay into pillar 3a in 2026? In 2026 an employee affiliated to a pension fund can pay in up to CHF 7,258. Someone without a pension fund, in particular a self-employed person or someone earning below the LPP entry threshold of CHF 22,680, can pay in 20 % of net earned income, up to CHF 36,288.
Is pillar 3b life insurance tax deductible? Not at federal level: it only falls under the flat-rate deductions for insurance premiums. Some cantons have more favourable rules. The surrender value is also subject to wealth tax.
Can a life insurer refuse me on health grounds? Yes. Unlike LAMal basic insurance, where acceptance is a right, life insurance is governed by the Insurance Contract Act: the insurer may ask health questions, apply loadings, exclude risks or decline the application.
Do cohabiting partners need life insurance? This is the situation where it is most useful. Cohabitants are not legal heirs, and LPP survivors' pensions are paid only if the pension fund's rules provide for it and the partner was registered during the insured person's lifetime.
Official sources
- Insurance Contract Act (LCA/VVG, SR 221.229.1): beneficiary clause, art. 76 to 86.
- Federal Act on Direct Federal Taxation (SR 642.11): taxation of insurance benefits.
- Official portal ch.ch: 3rd pillar: current maximum amounts.
- Occupational Pensions Act (SR 831.40): entry threshold.
How much would your loved ones really need?
Calculation of your protection gap (survivors' pensions included), and only then, the product choice.
Calculate my coverage gap