[Becoming an Insurance Insider] How to Smartly Cancel a 'Troublesome' Insurance Policy

[Editor's Note] Difficult insurance, a clear explanation of insurance that remains confusing even after listening to explanations. There is no bad insurance in the world, only insurance that does not fit me. Following easy-to-understand insurance explanations is not far from becoming an 'insurance insider.'

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[Asia Economy Reporter Oh Hyung-gil] With the economic recession compounded by the novel coronavirus disease (COVID-19), inquiries about insurance cancellations at insurance companies have recently surged.

On the 22nd, according to data compiled by the Life Insurance Association, the surrender refund payments made by life insurance companies to policyholders due to mid-term cancellations reached 24.4698 trillion KRW as of November last year.

The surrender refund amount has been increasing every year, from 18.4652 trillion KRW in 2015 to 20.0118 trillion KRW in 2016, 22.1086 trillion KRW in 2017, and 25.8135 trillion KRW in 2018.

The situation is similar in the non-life insurance industry. As of November last year, the long-term surrender refund amount of the top 10 major non-life insurance companies was 11.8159 trillion KRW, which is more than a 10% increase compared to 10.7367 trillion KRW in the same month of the previous year.

However, if you cancel your insurance due to financial difficulties, you will not be able to prepare for unexpected accidents that may occur, and the amount refunded will inevitably be less than the premiums already paid, resulting in financial loss.

First, it is good to prioritize among insurances. Many insurance experts consider indemnity health insurance as the top priority. Indemnity insurance can cover medical treatment costs at hospitals and clinics, and it is better to maintain older contracts because they have lower deductibles than recent contracts.

Next, insurance for the three major diseases?cancer, brain, and heart?is the second priority, followed by other coverage insurances such as fire, dementia, and dental insurance as the third priority. The last priority is savings-type insurance. Savings-type insurance used as a concept of savings or investment can be organized and is not essential insurance.

If insurance premiums are still burdensome, it is advisable to organize unnecessary riders.

Riders may have low premiums but require long-term payments, which can be burdensome, and many people have subscribed to riders that are not immediately necessary. Cancelling riders is possible separately from the main contract, allowing you to maintain essential coverage while reducing premiums.

Insurance companies also operate systems that allow policies to be maintained without cancellation, such as mid-term withdrawal, policy loans, reduction and paid-up insurance (reduction with paid-up), and temporary premium suspension.

If you are experiencing temporary financial difficulties, it is advantageous to use policy loans available within the surrender refund amount. You can borrow within the surrender refund amount of your insurance contract. However, if loan principal and interest repayments are overdue, the overdue amount will be deducted first when receiving insurance benefits.

Mid-term withdrawal within the surrender refund amount is also possible. This function allows partial withdrawal from the policy's reserve fund. When you have surplus funds later, you can repay the withdrawn amount to receive the same coverage again.

Reduction with paid-up insurance means maintaining the insurance without cancellation while no longer paying premiums. There are methods using the surrender refund and reducing the coverage scope.

For example, in cancer insurance, if the cancer diagnosis fund is 50 million KRW, the coverage can be reduced to 10 million KRW, thereby reducing or completely stopping premium payments.

An insurance industry official said, "If insurance is canceled mid-term, the loss to consumers can be significant," and added, "Before cancellation, it is recommended to check ways to maintain insurance according to your financial situation."

This content was produced with the assistance of AI translation services.