Life insurance

In June 2011, the number of Kazakhstanis wishing to insure their lives rose sharply, reports the Studio of Analytical Resources ("CAP").

"In one month, the volume of net premiums for voluntary life insurance increased by as much as 64.5%," the analysts' report says.

At the same time, net insurance premiums for voluntary personal life insurance in June of this year amounted to KZT 1.287 billion. By comparison, similar payments a month earlier stood at KZT 782.6 million.

Life is changing rapidly. Today the state no longer guarantees, as it once did, our children's education, housing for us and a decent standard of living in old age. Confidence in yourself and in tomorrow can only be gained by taking full responsibility for your own life.

Do you want your family's finances to be planned for many years ahead, and to ensure steady growth of your savings and their protection against inflation? Do you want you and your loved ones, regardless of your savings, to be financially protected in case of unforeseen situations in your life?

Savings life insurance has already become the norm all over the world, and Kazakhstan is gradually coming to it as well. I personally have 2 savings insurance programmes: the goal of the first is to accumulate capital for my child's university education, and the second programme is to build my pension, or additional income in the form of an annuity.

Life is priceless, but it may happen that, under an unfortunate combination of circumstances, the financial well-being of the whole family is put at risk. Life insurance companies offer savings programmes that provide financial support in the event of the loss of a breadwinner, disability or retirement, and allow you and your family to look to the future with confidence.

Life insurance and a long-term savings programme are not only a well-thought-out investment but also a real necessity for ensuring a stable position in the future.

In its classic form, it is essentially a bank deposit. The client periodically (for example, once a year or once a month) pays money to the insurance company and, after a number of years, receives it back with interest. Unlike banks, however, insurers take money for long terms (5-20 years or more) and do not promise a specific amount of profit. The contract usually specifies a guaranteed return (4-5%), while the actual profit can reach 8-15% per year. And taking into account tax benefits, there is also a 10% saving on income tax.

1. On the reliability of insurance companies
The question of Kazakhstan's accession to the World Trade Organization (WTO) is now on the agenda. One of the requirements for accession is the integration of the Kazakh insurance market with the international insurance market. Integration can only take place if the laws governing Kazakhstan's insurance market comply with international legislation.

Today the reliability of an insurance company is regulated by the Law of the Republic of Kazakhstan "On Insurance Activity"; the NBRK is a full member of the International Association of Insurance Supervisors (IAIS), and strict control over insurance companies by the state body and an authorised auditor is provided for. Under Article 824 of the Civil Code of the Republic of Kazakhstan, an insurance company covers the risk of fulfilling its obligations with another insurer; for example, for "BTA Zhizn" and "Alliance - Life Insurance" this is the Munich Reinsurance Company "Munich Re", with a financial strength and reliability rating of A+ from Standart's & Poors, and for "Generali Life" it is Assicurazioni Generali, the largest Italian insurance company and the 3rd largest in Europe, rated AA with a stable outlook by Standart's & Poors..

2. On tax benefits
Under sub-paragraph 4 of Article 166 of the Tax Code of the Republic of Kazakhstan, when determining an employee's income taxed at source, insurance premiums paid by an individual in their own favour under savings insurance contracts are deductible, i.e. your accumulated insurance capital is fully exempt from income tax.

After the policy has been issued, you need to submit an application to your accounting department, attaching a copy of the savings insurance policy and a copy of the receipt for payment of the insurance premium, and the income tax withheld from this amount will be refunded to you. For example, if your insurance contribution is 130 thousand a year, you will get 13 thousand back.

3.On the interest rate.
No commercial bank offers a return of 4-5% per annum for 20 years ahead. Insurers do. In addition, in a with-profits savings programme, the insured person receives annual dividends from the insurance company based on its performance.

4. Activities of foreign insurance companies in Kazakhstan
The Law of the Republic of Kazakhstan "On Insurance Activity" provides as follows:

Article 5(2) - Insurance of the property interests of a legal entity or its separate subdivisions located in the Republic of Kazakhstan, and of the property interests of an individual who is a resident of the Republic of Kazakhstan, may be carried out only by an insurance organisation that is a resident of the Republic of Kazakhstan holding the relevant licence of the authorised state body.

Article 14 - No person without the relevant licence has the right to carry out insurance activities in their own name.

Article 15(3) - Intermediary activity in concluding insurance contracts on behalf of an insurance organisation that is a non-resident of the Republic of Kazakhstan within the territory of the Republic of Kazakhstan is not permitted.

On the advantages of savings life insurance in Kazakhstan

the opportunity to save with a 100% guarantee of the safety of your funds

additional accident insurance

the opportunity to participate in the Company's profits from the 3rd year of insurance

tax benefits (Article 166 of the Tax Code) + exemption from inheritance tax

insurance protection (payment of the full sum insured to the heirs within 30 days)

confidentiality of the deposit (the sum insured cannot be confiscated)

the possibility of a loan secured by the policy (refinancing rate +2%)

the possibility of creating a lifetime annuity (pension)


Why get insured if you are:

1 - young, without a family yet, and "it's too early to think about a pension"

While you are young, everything is ahead of you. You will finish your studies, become a well-paid specialist, provide for yourself and your family, and help your ageing parents.. All of this will happen, definitely!!! Unless something goes wrong.. Insurance is needed precisely for that case, which can destroy all your plans. Moreover, death is not as frightening as total incapacity. When earning money is impossible, but you need money to live somehow and pay for your flat.. Without insurance, there will be no money.

Life insurance protects your financial interests. If, due to unfortunate circumstances, you lose the ability to earn money, you will still have it: the insurance company will pay it. That is why young people need insurance.

In addition, insurance builds capital for you: since everything is ahead of you, you can afford long insurance terms, and seemingly small contributions will be guaranteed to accumulate a very decent sum.

What is also important is that the funds in your savings insurance are out of reach of the tax inspectorate and creditors, are not divided in a divorce, etc. How many other ways of investing money do you know that cannot be divided or confiscated?..

2 - parents of the most beloved children in the world

Here, I think, everything is clear: a defenceless little person depends on you, your health and your financial well-being. If, God forbid, something happens to you, what will become of them? Take care of them in advance; it is not difficult at all! By the way, parents of "restless kids" have a wonderful opportunity to insure both themselves and their child against injuries in a single policy, and to save up for the child's university education or wedding. I think all parents will understand me.

At the same time, if misfortune strikes, an insurance indemnity is paid to cover the cost of treatment and restore the health of the adult or child. And capital for the child continues to accumulate. The child will be provided with money for education, or simply for a good start in life, always, however events unfold.

3 - already thinking about your own pension

You know, the sooner you start thinking about it, the easier it will be to accumulate a decent sum for a dignified retirement. Otherwise you will have to survive on what the state has saved for you. You will agree that an accumulative pension fund is a way to get by somehow in retirement. Some will be lucky and their fund will earn more money for them; others will be less lucky.. For this, firstly, you need to choose your fund yourself, and secondly, think about additional sources of income in advance. If you cannot afford to risk all your money, if you realise that old age is inevitable, do not stay idle! Make every effort right now to save for a decent old age, to protect yourself against accidents and injuries, so as not to become a burden on your children

4 - grandmothers and grandfathers

A special bow to grandmothers and grandfathers!
You know, if a person has learned during their life to manage their money wisely, they have accumulated capital and even now, being retired, help their children and grandchildren. And most likely, their children and grandchildren will continue this tradition: this is a certain financial culture that we strive for.

I have already written in the article "How to pass on an inheritance wisely" about the possibilities of savings insurance. This is especially relevant when grandparents want to give a grandson or granddaughter money for university or a wedding. Giving it to them now carries the risk of a mistake, an unwise investment or, simply, the chance that it will be spent. Waiting until the grandchildren finish school... has its own risks; you may not make it in time... But taking out a savings insurance policy for a certain term to pass capital on to your grandchildren is possible at any age. And you will have peace of mind: your grandson or granddaughter will certainly receive your gift at the right moment. And they will remember their grandfather (or grandmother) with kind words.

Savings insurance

Pros
The contract is concluded only with the insurance organisation; there is no need to waste time visiting a bank.
When an insured event occurs, the heirs receive the money immediately.
Not subject to seizure or confiscation.
It is possible to take a preferential loan secured by the policy (in the amount of the surrender value)

Cons
If you miss one payment, the insurance protection under the policy is lost
On early termination, the surrender value is 70-80%. That is, you incur a direct loss.

Term insurance + deposit

Cons
In addition to the insurance company, you also need to conclude a contract with a bank.
When an insured event occurs, the heirs will receive your deposit only after six months. But they will receive the insurance amount immediately.

Pros
Higher income.
On early termination you lose nothing, and therefore you can change insurance company at any time.
Your deposit is protected by the deposit insurance system.

In addition to ordinary savings insurance, there is also a modified version in which, starting from the 2nd-3rd year, you participate in the insurance company's investment income. Last year the investment income was about 12%, i.e. again less than what banks offer on deposits.