Life Insurance Association Expands Premium Payment Deferral Amid COVID-19

[Asia Economy Reporter Oh Hyung-gil] The life insurance industry has decided to expand the operation of systems that allow policyholders to maintain their insurance contracts without cancellation. This move comes as the number of consumers wanting to cancel their insurance contracts has increased recently due to the spread of the novel coronavirus disease (COVID-19).

On the 31st, the Life Insurance Association advised that consumers should use various insurance contract maintenance systems provided by insurers, considering the characteristics of the insurance products they have subscribed to and their household situations.

Because insurance products are designed based on the full payment of premiums, consumers inevitably suffer losses if they cancel mid-term. As a result, the surrender value may be less than the total premiums paid, or re-enrollment in the same insurance may be refused later.

Insurers are allowing premium payment deferrals for customers facing economic difficulties due to COVID-19. Premium payment deferral is a system that allows maintaining the insurance contract without paying premiums for a certain period. However, since risk premiums and administrative expenses necessary for contract maintenance are deducted from the surrender value, if these amounts cannot be covered, the insurance contract may be automatically canceled, so caution is required.

The reduction system, which lowers the insured amount and reduces premiums to maintain the contract, is also useful. For example, in cancer insurance, if the cancer diagnosis fund is 50 million won, it can be reduced to 10 million won, thereby lowering the premium.

Additionally, there is the reduced paid-up insurance system, which allows full payment without paying additional premiums. At that point, the new insured amount is determined by the surrender value, and the premium is fully paid. The original insurance period and benefits remain unchanged, but the coverage amount decreases. Similar to this, the extended term insurance system can be used, which shortens the coverage period instead of paying further premiums.

If you want to maintain insurance without paying premiums, you can use the automatic loan premium payment system, which treats the amount equivalent to the monthly premium within the surrender value as a loan against the insurance contract and automatically pays the premium.

An official from the Life Insurance Association said, "Each product’s terms and conditions include details about insurance contract maintenance systems, so you can check these or consult with the insurer to use them," adding, "Rather than being exposed to future risks due to sudden insurance cancellation, it is better to find various ways to reduce premium burdens."

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