It is not clear how it works
Investment life insurance is a financial product that combines life insurance and an investment instrument that allows generate income by investing money in various financial assets (bonds or stocks). The insurance organization acts as a management company investing clients' funds in business areas chosen by the clients.
“The main tasks are life insurance and accumulation of capital for such long-term life goals as education, retirement savings, real estate and more,” says Nurbek Abzhanov, the Chief of Investment Life Insurance Department of LIC Nomad Life.
Upon policy expiration, the client receives the accumulated amount, which during this time can increase significantly due to the growth in the cost of the investment. In case of insured event occurrence before the contract expiration, the insurance company pays out the insurance benefit and accumulated investment amount to the beneficiary pre-selected by the client.
The funds of the client are divided into two following parts:
1) Insurance: 10% of the contribution amount is sent to the classic endowment life insurance with a guaranteed rate of up to 3.41% in foreign currency;
2) Investment: the remaining funds are invested in portfolios selected by the client. “Our customers have the opportunity to track the value of their own portfolios in their personal accounts. They have the right to terminate the contract and transfer savings to the insurance part by concluding an agreement with a guaranteed rate, or change their strategy and transfer money to other investment portfolios depending on their “risk appetite”. For instance, we are launching an investment portfolio "US Treasury bonds" consisting of reliable assets - US government securities and acting as protection during economic shocks and recessions,” the source said.
Unit-Linked does not give a high return
Money under the program is invested in foreign financial instruments. Therefore, US dollar is the agreement currency. When forming investment portfolios, Nomad Life focused primarily on the historical results of the stock index return, and chose financial instruments of the largest foreign management companies. “We have chosen the passive index investing approach as it is a reliable investment method and the portfolio structure is clear to clients. The actual weighted average increase in value for the proposed investment strategies since the launch (for 8 months) amounted to 17.43% in foreign currency,” shares the interviewee.
Policyholders will not be able to partially withdraw their funds or early terminate the insurance contract
Unit-linked contracts provide for three following options: a partial withdrawal, replenishment and early termination. The experts do not recommend prematurely canceling the contract in the first two years, since the main approach of the unit-linked program is the effect of compound interest, which is most effectively implemented with a longer contract term.
Tax exemptions are hard to get
When buying securities on the local market, there are tax preferences in Kazakhstan, but if an investor buys them in foreign markets, the benefits stop working. Policyholders enjoy tax preferences when concluding investment life insurance contracts, although their money is invested in foreign markets.
ZOLOTO NOMADOV Invest policy allows our clients to reduce their income tax and increase their income accordingly. Tax incentives on investment insurance are provided in the form of:
- Tax exemption on redemption amounts paid upon contract termination;
- Tax exemption on amount equal to the size of insurance premium paid under agreement concluded for a period of 3 years or more (no more than 320 MCI per year), concludes Nurbek Abzhanov.