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Comparing US dollar programs of Kazakhstani life insurers

The number of people who know exactly what they want to get tomorrow is growing every year in our country. They set goals and calculate how much money and time it will take. Given the volatility of the tenge exchange rate, some Kazakhstanis prefer to save in foreign currency in order to at least maintain the purchasing power of their savings. Banks offer dollar deposits at 1% per annum, while life insurance companies provide returns on dollar policies up to 5% per annum. This article will introduce you to the available policies and help you choose the best option.
Comparing US dollar programs of Kazakhstani life insurers

The exchange rate of the national currency fluctuated last year, therefore the life insurance market recorded a decline in demand for dollar products. LICs increased the total collection of premiums by 34% at the end of 2023 against a decrease of 0.8% a year earlier. “We obviously realize that a million tenge 10 years ago and now are two completely different amounts in terms of consumer value. The product’s important feature is that it guarantees the client insurance coverage for the entire period of savings. This means that from the moment the insurance premium is paid, the client’s life is insured for the entire amount of savings, including the sum of investment return. Thus, if during the insurance period the insured client passes due to an accident or illness, then the persons indicated as recipients of insurance benefit immediately receive the amount for which the policyholder was insured in full, including the amount of the guaranteed investment return,” Zhanar Zhubaniyazova, Chairman of the Board of LIC Halyk-Life, explains the peculiarity of dollar savings products.

The perks of foreign exchange insurance products are insurance coverage plus return (money) for a certain period. “Some companies provide the opportunity to obtain a loan secured by the redemption sum of the policy. There is also a deduction of insurance premiums from taxable income. Besides, insurance coverage is valid throughout the world, 24 hours a day,” says Oleg Khanin, Chairman of the Board of LIC Kommesk-Omir.

Endowment insurance products have become more popular over the past few years due to legislative amendments adopted in January 2021; this relates to tax benefits on endowment life insurance programs. With an endowment life insurance agreement of 3 years or more, a policyholder can now save on taxes up to 93 thousand tenge per year. The insurance company’s client may not pay tax for payments under endowment contracts and for redemption amounts upon contract termination with LIC.

“Currency programs are unique and definitely lucrative for the client, since the return on these programs is higher than on dollar deposits. The product advantages such as high rates, tax benefits, legal privileges and life insurance for the entire policy period attract customers, and the number of contracts increases annually. Tremendous work is required for the mass promotion of endowment insurance products,” explains the press service of LIC Eurasia.

The shortcomings are that early termination of the agreement is unbeneficial, as not all the money is returned but only the redemption amount.

Programs

LIC Halyk-Life offers the Halyk-Kazyna product with a guaranteed return of up to 4.2% per annum, which is, in fact, higher than that of foreign currency deposits. “After three years, the company has constantly received positive returns on the Halyk-Kazyna product, thanks to a timely revision of investment strategy and coverage of obligations. This is positively influenced, among other things, by a close relationship with the management company, their understanding of the product and professionalism in working in foreign financial markets,” shares the executive of LIC Halyk-Life.

The main advantages of the Halyk-Kazyna product:

  • The funds can bring the client a return on investment of up to 4.2%;
  • The funds provide the client with a good insurance coverage;
  • The client’s funds under this program are liquid - they can be withdrawn at any time (receive the redemption amount upon termination), or it is possible to issue a loan secured by the redemption amount on preferential terms;
  • The funds are protected from claims of third parties and the state;
  • The customer can indicate a beneficiary that will receive the insurance benefit in the event of the insured person’s death; this does not require either a will or inheritance.

The minimum lump-sum insurance premium is 1000 US dollars equivalent in tenge.

LIC Kommesk-Omir has a product Satti Omir, an endowment life insurance program with indexation and profit sharing, which allows you to simultaneously provide financial security from the consequences of accidents and illnesses, create savings with investment return for various purposes and guarantee decent security in old age.

“The volatility of the national currency and the higher rate of return compared to bank deposits must be considered. For example, under contracts linked to changes in the exchange rate, the insurance market offers over 3.4% depending on the insurance period and amount of indexation, which is (2-3 times) more  than what banks offer on foreign currency deposits. It is also important that in addition to savings, a person is also covered by a life insurance policy,” explains Oleg Khanin.

The minimum lump-sum insurance premium is 1,000 US dollars equivalent in tenge at the National Bank rate. The maximum insurance period is 15 years; the upper limit of the insurance premium is unlimited.

LIC Eurasia operates three endowment life insurance programs, they are as follows: Grant (SESS), Brilliant and Tarlan USD.

Grant: a minimum threshold of $500 at the National Bank rate with the possibility of replenishment.

Brilliant: $960 at the National Bank rate with the possibility of replenishment.

Tarlan USD: 1,000 dollars at the NB exchange rate.

LIC Freedom Life has three following endowment programs indexed to US dollar exchange rate: Freedom First, Freedom Capital and Freedom Money; each of them has its own characteristics and terms:

The contract under the Freedom First program can be concluded online, without leaving your home; you can pay the insurance premium at any time and receive a partial payment during the accumulation period. The insurance period under this program is from 2 to 5 years. The return based on an annual effective interest rate of up to 2.76% in US dollars.

The agreement under the Freedom Capital program is concluded for a period of 3 to 10 years. The annual effective interest rate in US dollars is up to 4% and up to 1.5% in euros. The insurance premium is made all at once.

“The Freedom Money program has a contractual savings period of 5 years or more. The insurance premiums can be paid at a certain frequency (monthly/quarterly/semiannually/annually or all at once). This program can include various extra types of insurance coverage in case of disability, injury, or critical illness. The payment of savings is indexed to the US dollar exchange rate at the end of the contract,” concluded Azamat Yerdessov, Chairman of the Board of LIC Freedom Life.

The Freedom Capital program requires a lump-sum insurance premium of $1,000.

The initial instalment on Freedom First is from $250.

The minimum insurance premium on the Freedom Money program is from 15,000 tenge (33.20 US dollars at the current exchange rate).

According to the National Bank of the Republic of Kazakhstan, the total volume of premiums on voluntary personal insurance, which also includes endowment life insurance products, has amounted to 363.2 billion tenge for 11 months of 2023, which is 33.8% more than the same period in 2022.

Photos are from open sources.

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