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Why is life insurance beneficial?

The S&P Global Ratings report “Assessment of Industry and Country Risks of the Life Insurance Sector: Republic of Kazakhstan” notes that the growth of insurance premiums in the industry amounted to 1.1 times over four months of 2021. The representatives of two large companies in the sector, Nomad Life and Halyk-Life, told the LIFE INSURANCE portal which insurance policies are most often bought by LIC clients.
Why is life insurance beneficial?

The largest share in the Nomad Life product basket in terms of insurance premiums is taken by retirement annuity contracts. The endowment life insurance programs are in the second place. The most popular products among the latter are ZOLOTO NOMADOV and ZOLOTO NOMADOV Invest. One of the most popular products of Halyk-Life is the Halyk-Kazyna program.

Saving and investment products

Endowment insurance programs are of interest to clients, since they are the best alternative to bank deposits today. After all, the rate of remuneration charged under endowment insurance contracts is higher than the bank rate. “Besides, the owners of endowment insurance policies enjoy tax benefits, receive legal privileges, and are provided with insurance coverage. The ZOLOTO NOMADOV Invest program provides clients with access to the international stock market along with that,” explains Ramay Kurbangaliyev, Director of the Sales and Regional Development Department of JSC LIC Nomad Life.

The product “Halyk-Kazyna” is designed for the category of people who are looking for new ways to invest their savings. “The insurance program guarantees the return on investment of up to 3.52% per annum in foreign currency, depending on the period of insurance. The main condition is a one-time payment of the entire amount, since the company indexes the client's money into US dollars, and this helps protect people's savings from exchange rate losses,” the acting chairman of the board of JSC Halyk Life Andrey Dzheksembayev says.

According to the interlocutors, the popularity of the products is ensured by the loyal conditions of the insurers and tax incentives. Thus, the funds of customers on these products are liquid; they can be withdrawn at any time (by getting the redemption amount upon termination). The policy owner determines the beneficiary to receive the insurance payment in the event of the insured person’s death. Besides, LIC clients get a tax benefit within 320 times the MCI under the endowment insurance agreement concluded for a period of three years or more.

Retirement annuity

According to the results of the first four months, the total annuity insurance premiums increased by 203.9% compared to the same results in 2020 reaching 54.8 billion tenge. All companies collecting premiums in the segment of annuity insurance and retirement annuities showed positive dynamics of premiums, but Nomad Life turned out to be the sector leader. According to the results of April, the volume of LIC's portfolio on annuity insurance increased to 18.4 billion tenge, 18.1 billion tenge of which were retirement annuities.

“Customers are attracted to retirement annuity because thanks to this insurance program, they start using their pension savings much before the retirement age. In addition, the payments provided by Nomad Life will be for life, i.e. the situation when the agreement owner is left without a livelihood upon reaching old age, is excluded,” emphasizes Ramay Kurbangaliyev.

How not to make a mistake when choosing

The products of the life insurance market are divided into risky (when payments are made in the event of a risk of death or disease) and accumulative. Accumulative products provide for payments in the event of negative circumstances, but most importantly, they guarantee profit at the end of the contract.

“One of the advantages of endowment life insurance is that a person of almost any age can select the optimal for him program, - assures Andrey Dzheksembayev. - The main perk is that the insured amount, which a person's life is insured for, is paid at the end of the insurance contract or if an insured event occurs during the period of the insurance contract specified in the insurance police conditions. Therefore, the policy of long-term savings has such set of properties as investment in the future and insurance protection from the first day of the contract conclusion.”

Endowment insurance is a financial planning and risk management tool. The payments to be made by the life insurance company are target-oriented. “This can be, for example, higher education for children, large purchases, rent for the older generation, or, in extreme cases, payment made to a family that loses the main breadwinner. If the insurance agreement terms satisfy the client’s needs, the proposed insurance program is the best tool for him,” says the director of the sales and regional development department of JSC LIC Nomad Life.

Endowment life insurance is designed for long-term savings, for example, a deposit cannot be considered as a long-term financial instrument, whereas an endowment agreement is concluded for a period of 3 to 30 years. A person is disciplined by making regular contributions during this period. The client can terminate the insurance contract ahead of schedule but in this case he receives a redemption amount, which in the first years of insurance is usually less than the amount of paid insurance premiums.

“Guaranteed profitability is a defense mechanism against the inflation effect. The amount of guaranteed return varies depending on the insurance agreement terms. The permanent conditions of the insurance contract, i.e. the tariff and risks are determined at the time of the agreement conclusion and do not change until the expiration of its validity period. Besides, all insurance premiums that are paid under the endowment life insurance policy have a special status. The authorized bodies do not have the opportunity to impose seizure or other judicial penalties on the obligations of the insurance contract owner, and insurance premiums are not subject to division in case of divorce,” the acting Board Chairman of JSC Halyk-Life concluded.

According to insurers, additional options of the savings policy are also important, such as the possibility of obtaining a loan secured by a policy, indexation of the obligations of an insurance organization in relation to the foreign exchange rate, a wide range of options for investing their funds, convenient terms of payment of insurance premiums, flexibility of tariff policy.

Photos are from open sources.

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