Need urgent cash, should I break insurance? "Consider insurance policy loans first"

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[Asia Economy Reporter Changhwan Lee] # Mr. A, who urgently needed 3 million won, canceled an insurance contract he had signed 20 years ago and secured funds through the surrender value. However, when he later had extra funds and tried to reapply for insurance under the same conditions as the previous contract, he was unable to do so. On the other hand, Mr. B, who was in the same situation, used an insurance policy loan, maintained his existing insurance, and was able to repay the loan without any early repayment fees when he later had extra funds.

As the economic downturn and interest rate hikes continue, the number of people canceling insurance contracts due to urgent cash needs is increasing. However, experts point out that instead of canceling insurance, it is necessary to first explore insurance policy loan services.

According to the Financial Supervisory Service on the 23rd, an insurance policy loan is a loan service that allows free use within a certain range (50?95%) of the surrender value while maintaining the insurance coverage as is.

It is useful for financial consumers with low credit ratings who face restrictions in using loans from general financial companies or whose cash flow is unstable.

Insurance policy loans can be applied for 24 hours a day, have no loan screening procedures such as credit rating checks, do not affect credit ratings even if the loan is overdue, and have the advantage of no early repayment fees even if repaid at any time.

Therefore, the Financial Supervisory Service stated that in cases where urgent funds are needed, it is necessary to first consider securing the required funds through an insurance policy loan rather than canceling the insurance.

However, the interest rate on insurance policy loans varies depending on the time of insurance subscription, insurance product, and insurance company. It was explained that one should carefully compare the interest rates applied to their insurance product with those of other financial institutions (such as banks) before making a choice.

For example, in the case of past fixed high-interest products, the reference interest rate for insurance policy loans, which is the reserve fund yield (around 7%), is high, so the insurance policy loan interest rate can reach 8% to 9%.

A Financial Supervisory Service official said, "If you cancel your insurance contract, you cannot receive coverage in the event of an insurance accident, and the surrender value is less than the premiums paid, which can result in financial loss," adding, "Considering that it may not be easy to subscribe to insurance under the same conditions in the future, it is necessary to first consider an insurance policy loan."

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