Older adults attend the 2024 literacy schooling commencement ceremony on the Seoul Schooling Coaching Institute in Seocho District, Seoul, Feb. 12. Yonhap
Lee, a 39-year-old man who works at a consulting agency in Seoul’s Guro District, canceled his complete life insurance coverage coverage two years in the past after sustaining it for a few decade.
Though the quantity Lee acquired was lower than his principal, he discovered it troublesome to proceed paying greater than 100,000 received ($69) in month-to-month premiums for demise advantages, which felt like a distant concern.
“With medical indemnity insurance coverage, I obtain payouts each time I go to a hospital, so I do not really feel like my premiums are wasted. However complete life insurance coverage felt like an asset I couldn’t use and had forgotten about,” Lee mentioned. “Even when canceling meant shedding a part of my principal, I figured it was higher to cease paying premiums for many years to return and use that cash for my present residing bills as an alternative.”
Entire life insurance coverage, a sort of life insurance coverage, gives lifelong protection and pays demise advantages to designated beneficiaries upon the policyholder’s passing. It additionally accumulates money worth over time. This differs from time period life insurance coverage, which gives protection for a hard and fast interval with out a money worth part.
Since its introduction within the Nineteen Sixties, complete life insurance coverage was as soon as thought-about essential for the top of a family and served as a significant income driver for all times insurance coverage corporations.
Nevertheless, as life expectancy rises alongside an getting old inhabitants, such a product is shedding its enchantment resulting from its construction, which prevents policyholders from accessing their paid premiums, even when they face monetary difficulties after retirement.
In line with the Monetary Supervisory Service’s (FSS) Monetary Statistics Info System, the variety of new complete life insurance coverage contracts dropped from 1.65 million in 2020 to 1.06 million final yr.
Over the identical interval, the full contract quantity additionally fell by roughly 45 p.c from 88.6 trillion received to 49.1 trillion received.
In opposition to this backdrop, monetary authorities have now launched plans to permit policyholders to make the most of demise advantages whereas nonetheless alive, aiming to reinforce the utility of complete life insurance coverage.
As early because the third quarter of this yr, policyholders will be capable to obtain their complete life insurance coverage demise advantages within the type of month-to-month annuity funds whereas they’re nonetheless alive, or use them for companies comparable to well being care.
The measures had been finalized in the course of the insurance coverage reform assembly on Tuesday, held by the Monetary Companies Fee (FSC) and the FSS, attended by over 130 contributors, together with insurance coverage firm CEOs and teachers.
The FSC mentioned as inhabitants getting old accelerates and life expectancy will increase, the significance of retirement revenue is rising. Nevertheless, Korea’s older grownup poverty fee stands at 39.2 p.c, one of many highest amongst OECD international locations, and retirement preparedness by pensions and different means stays inadequate in comparison with main superior economies.
To deal with this, the federal government plans to supply a steady supply of revenue after retirement by permitting policyholders to entry their demise advantages.
Underneath the federal government’s tips, policyholders will be capable to select between an annuity-type or service-type choice whereas maintaining their demise advantages intact.
The annuity-type choice allows policyholders to obtain their demise advantages in month-to-month funds, just like a pension. The service-type choice permits them to make use of their advantages for companies comparable to caregiving and well being care.
Monetary Companies Fee Vice Chairman Kim So-young speaks in the course of the insurance coverage reform assembly at Authorities Complicated Seoul, Tuesday. Yonhap
Contemplating the character of complete life insurance coverage, policyholders will be capable to make the most of as much as 90 p.c of their demise advantages moderately than the total quantity. As a substitute of a one-time cost, the advantages can be distributed in common installments, comparable to over a 20-year interval.
Life insurance coverage insurance policies eligible for these measures should have a contract time period of not less than 10 years and a premium cost interval of not less than 5 years, with the policyholder and the insured being the identical individual. Moreover, the coverage should not have any excellent coverage loans.
There aren’t any particular revenue or asset necessities, and any policyholder aged 65 or older on the time of software can apply.
Nevertheless, curiosity rate-linked complete life insurance coverage insurance policies and people with ultra-high demise advantages exceeding 900 million received are excluded from this system.
As of December 2024, roughly 339,000 insurance policies are anticipated to be eligible for this system, with an estimated complete worth of 11.9 trillion received.
The related merchandise are set to roll out regularly beginning as early because the third quarter, starting with insurers which have finalized their preparations.
Monetary authorities intend to type a process pressure with trade representatives to refine detailed operational tips, together with measures for client safety.
“This system can present customers with a steady supply of retirement revenue whereas enhancing insurers’ roles by expanded companies,” FSC Vice Chairman Kim So-young mentioned. “As this includes a brand new product construction, implementing thorough client safety measures is important to stop potential dangers.”
