There is a longevity risk of financial hardship as a result of living longer and depleting your savings to meet your living expenses. As we approach the era of 100-year lifespans, how to secure living expenses after retirement is a very important issue.
Here, we will explain the advantages and disadvantages of endowment insurance, which is one of the means of securing living expenses after retirement, in addition to its features and differences from whole life insurance.
What is endowment insurance?
With endowment insurance, if the insured person (the person insured) dies during the insurance period, the death benefit is paid to the beneficiary, and if the beneficiary survives until maturity, the maturity benefit is paid. Life insurance in which the maturity benefit is paid to the beneficiary.
The term of insurance is determined in advance, and there are two types: the yearly expiration with a period of 10 years, 15 years, etc., and the age-based expiration with age limits such as 60 and 70 years old.
The biggest feature of endowment insurance is that the same amount is paid regardless of whether the insured dies during the insurance period or reaches maturity. It can be said that it is an insurance that has both a protection function and a savings feature in case of emergency. However, in many cases, death benefits and maturity benefits are less than the total amount of premiums paid.
Who is endowment insurance for?
Endowment insurance is suitable for people who want to prepare for unforeseen circumstances while building assets. For example, there is a method of systematically preparing educational funds in preparation for further education while ensuring security until the child becomes independent.
In addition, there may be a way to receive it before the age of 60, which cannot be covered by the public pension, and use it as living expenses.
Difference between endowment insurance and whole life insurance
Like endowment insurance, whole life insurance is a type of life insurance that offers both protection and savings.
Next, let's introduce the differences between endowment insurance and whole life insurance for each item, such as the insurance period, maturity benefit, and surrender value (surrender value).
Period of insurance
Endowment insurance has a fixed insurance period, and when the insurance period expires, the coverage ends. Whole life insurance, on the other hand, continues to be covered for the rest of your life unless you voluntarily cancel or expire due to unpaid premiums.
Presence/absence of maturity benefits and cancellation refunds
Endowment insurance pays a maturity benefit equal to the death benefit if the insured person is still alive at maturity. Whole life insurance has no maturity and no maturity benefit. In addition, both endowment insurance and whole life insurance pay a cash surrender value when the policy is canceled, but in many cases, the cash surrender value is less than the total amount of premiums paid.
Benefits of endowment insurance
There are two possible benefits of long-term care insurance.
Some products allow you to freely set the insurance period.
A death benefit equal to the maturity benefit will be paid in the event of an emergency.
Now let's take a look at these benefits.
You can freely set the insurance period.
Some endowment insurance products allow you to freely set the insurance period, which is useful for asset building according to life events.
For example, it can be used to systematically prepare funds for education while securing security in the event of a child turning 18, or to secure living expenses after retirement in accordance with the timing of retirement. increase. The advantage is that the maturity benefit amount can be set according to the purpose.
In the event of an accident, you can receive a death benefit equal to the maturity benefit
The advantage of endowment insurance is that in the unlikely event of an accident, the death benefit is equal to the maturity benefit.
Even if the term of endowment insurance is short and the total amount of premiums paid is small, if the insured person dies, the death benefit equal to the maturity benefit can be received.
Disadvantages of endowment insurance
Disadvantages of endowment insurance include:
High monthly insurance premiums
In many cases, the maturity amount insured is less than the total amount of premiums paid
Finally, let's talk about these drawbacks.
Monthly premiums are higher than life insurance with only death protection
Since endowment insurance is a savings-type insurance, monthly premiums are set higher than life insurance that only provides death protection.
Also, when you surrender, the surrender value is generally less than the total amount of premiums paid.
Therefore, it is necessary to consider whether you can afford to pay monthly premiums without difficulty before enrolling.
In many cases, the maturity amount insured is less than the total amount of premiums paid
Points to consider when choosing an endowment insurance policy
When choosing an endowment insurance, consider the following points based on the advantages and disadvantages.
- Period of insurance
- death benefit
- Maturity insurance benefits/cancellation refunds
Insurance fee
First of all, it is important to think about what to prepare for and set the insurance period necessary for it. For example, let's set the period until the child becomes independent and consider how much death benefit is required.
Also, in many cases, it is necessary to consider whether you can afford to pay monthly premiums, keeping in mind that the maturity benefits and cancellation refunds are less than the total amount of premiums paid.
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