Insurance Tips for Young Adults: "Choose Term Over Whole Life, Only One Real Expense Insurance"

Pure Protection Products Without Refunds Are Cheaper
Carefully Check the Product Description Before Signing Up

Financial authorities have urged caution for young adults entering the workforce when purchasing insurance. They explained that there is no need to have duplicate subscriptions for indemnity health insurance, and that setting a term rather than whole life for death insurance can reduce premiums.

On the 23rd, the Financial Supervisory Service released the first part of "Smart Enrollment in Financial Products for New Employees," which includes these points. Given that 49.5% (4,461 cases) of all complaints about incomplete insurance sales last year were filed by subscribers in their 20s and 30s, it was deemed necessary for young adults to be well aware of various precautions.

First, since insurance requires paying premiums and maintaining the policy over a relatively long period, it was advised to carefully consider income level and the purpose of enrollment. Rather than relying on recommendations from acquaintances, individuals should decide for themselves whether to subscribe to insurance. It was explained that one should carefully check whether the premiums are not too burdensome relative to income and whether they can maintain the insurance contract over the long term. Additionally, it was emphasized to consider the purpose of enrollment, such as choosing protection-type insurance (like indemnity health insurance) for treatment costs due to illness or injury, and savings-type insurance (such as pension insurance) for retirement funds.

Advice was also given regarding savings-type insurance. Although savings-type insurance can receive tax benefits, unlike financial products such as deposits and savings accounts, contract establishment costs are deducted from the premiums paid. Therefore, early cancellation may result in principal loss.

Ways to reduce premiums were also suggested. First, protection-type insurance that covers risks such as illness or injury tends to have lower premiums if there is no maturity refund that returns the premiums paid at maturity. For example, if a 30-year-old man subscribes to Company A’s injury insurance with an 80-year maturity over 20 years, the monthly premium is 32,000 KRW with a maturity refund. However, if he subscribes to a pure protection-type insurance without a maturity refund, the premium is 20,000 KRW, which is 38.8% cheaper.

For death insurance that pays benefits to spouses or children upon death, term insurance with a set coverage period is much cheaper than whole life insurance. For example, if a 30-year-old man subscribes to Company C’s death insurance with 100 million KRW coverage over 20 years, choosing term insurance (103,000 KRW monthly, maturity at 80 years) instead of whole life (228,000 KRW) reduces the premium by more than half.

However, for no-surrender or low-surrender value insurance, although premiums are cheaper than general products, the surrender value upon early cancellation may be low or minimal. It is necessary to compare premiums and surrender values with general products offering the same coverage as stated in the product description before subscribing.

Additionally, it was noted that indemnity health insurance, considered a "national insurance," does not provide overlapping coverage even if subscribed to more than twice, and that mobile subscriptions for automobile insurance tend to be cheaper.

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