Investment life insurance is, firstly, a financial instrument through which the client makes investments in the medium and long term. The program is a combination of insurance coverage (life insurance) and capital accumulation for various life goals by investing in financial instruments. The return that will be generated during the validity of the insurance contract depends on the financial market conditions, while the historical profitability in the selected areas of investment on average over 10 years ranges from 10% in US dollars. “But it should be remembered that investment risks are borne by the client,” says Nurlybek Tolykbayev, deputy chairman of the board of LIC Nomad Life. - Secondly, there are a number of legal privileges - the rights to receive insurance benefit are not confiscated and are not subject to seizure and are not divided during a divorce. Thirdly, in contrast to independent investment, the policyholder’s return from the increase in the value of assets is exempt from taxation. Fourthly, the Company provides life insurance coverage to the program clients 24/7 in any part of the world.”
Endowment insurance within the SESS framework is a program that allows more parents to save money for their children’s education. Along with return on investment of up to 4.1% in US dollars, there is an opportunity to receive a 5% annual premium from the government. “Besides, the company provides insurance coverage to the parent making the contributions; in the event of the loss of a parent or their loss of labor capacity with the establishment of disability of group I or II, the company will pay the entire amount under the contract, regardless of the size and number of contributions made. Moreover, if a child wins a grant, he gets to choose whether keep the money for post-graduate degree, transfer the savings to sibling, or even spend it on own needs (buying a car, apartment, etc.). And finally, a contract concluded for three years or more is subject to tax benefits; the policyholder can save 10% of the sum of all paid premiums on taxes (no more than 320 MCI per year),” says the deputy chairman of the board of LIC Nomad Life.
The annual rate of return is usually fixed immediately in endowment life insurance, and the client knows the exact amount they or their loved ones will receive at the end of the contract or upon the insured event occurrence. “In investment insurance, the rate of return depends on the value of assets to which the client’s contributions are tied. Foreign currency is a classic example. The client purchases an insurance product linked to the foreign currency exchange rate. The return on such products is usually higher than their banking counterparts. In addition to a stable rate of return, the final payment amount is also affected by changes in the exchange rate, and in the event of devaluation, the return in tenge grows proportionally,” says Alemzhan Akazhanov, deputy chairman of the board of LIC Standard Life.
The cost of universal life insurance (ULI) is easy to estimate by simply dividing the amount you want to receive for survival by the number of years of the insurance program. The focus may vary depending on additional risks included in the program (gender, age, etc.).
It is important to bear in mind the following:
– when getting ULI, the premiums can be single or periodic (on a monthly, quarterly, semi-annual or annual basis);
– in investment life insurance (ILI), the premium is usually single.
For example, LIC Halyk-Life provides universal life insurance for individuals in almost 10 products. Life insurance programs differ in the insurance period, insurance risks included in the program, and the Halyk-Kazyna program is a foreign currency product that guarantees investment return of up to 4.2% per annum in US dollars, depending on the insurance period.
“All life insurance programs perform a basic social function – financial protection of the client and their loved ones from the consequences of unforeseen circumstances for the entire term of the contract. The main coverage provided on all endowment life insurance programs in our company is death for any reason (illness or accident) during the validity period of the insurance agreement and survival until the end of the insurance period. In this context, survival means that if nothing happens to the insured during the insurance period, they will receive payout upon expiration of the insurance contract,” clarifies Zhanar Zhubaniyazova, Chairman of the Board of LIC Halyk-Life.
The insurance period can reach 30 years. The insurance policy is valid 24/7 worldwide. The company also has an endowment insurance product, Halyk-Kazyna, which provides for indexation to the US dollar. The return on this product exceeds the rate on a dollar deposit in a second-tier bank by approximately 4 times. “If the maximum rate on such deposits on the market does not exceed 1%, the rate under this program reaches 4.2% per annum. Moreover, this rate is guaranteed for the entire insurance period, which can reach 20 years. No bank deposit provides a guaranteed return for such a long period. Thus, by purchasing such a policy, our citizens will be able not only to reduce their currency risks but also insure their lives in case of unforeseen circumstances. This product is quite relevant, given the situation on the foreign exchange market now. Let me remind you that the accumulated amount with compensation is paid to the insured at the end of the contract. That is, the payment will be made even if an insured event does not occur,” emphasizes the chairman of the board of LIC Halyk-Life.
It is important that the funds under this policy cannot be confiscated during judicial disputes, nor can they be divided between spouses during divorce proceedings, since formally the insurance premiums are the LIC’s property. Besides, insurance payments are not subject to income tax. Therefore, this product is quite in demand in our company, mainly due to its investment option.
“In order to conclude a universal life insurance agreement, it is enough to choose regular premiums in the amount of 10,000 tenge per month. To apply for currency programs, it is enough to make a one-time deposit in tenge equivalent to 1000 US dollars. If a 10-year program is chosen, the insurance organizations can accrue 4% per year indexing the amount at the dollar exchange rate on annual basis. For comparison, banks open similar foreign currency deposit programs at 1% per annum. In this regard, the insurance product turns out to be 4 times more lucrative,” explains the deputy chairman of the board of LIC Standard Life.
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