From Coverage to Tax Savings... Check Insurance Tax Benefits

Tax Exemption for Savings Insurance, Year-End Tax Deduction, and More

In addition to the basic risk coverage of life insurance products, it is advised to check and take advantage of tax exemptions on savings-type insurance and year-end tax credit benefits.

On the 31st, the Life Insurance Association provided guidance on how to utilize insurance in this regard. First, it urged confirming the main tax benefits when subscribing to life insurance. A representative example is the tax exemption on insurance gains from savings-type insurance. Interest income from bank deposits and savings accounts is subject to a 15.4% interest income tax, including local tax. In savings insurance, pension savings insurance, and other savings-type insurance, the amount obtained by subtracting the paid premiums from the maturity insurance money or early surrender refund is classified as interest income.

In this case, ▲ a single-premium savings-type insurance maintained for more than 10 years with a payment amount of 100 million KRW or less ▲ a monthly installment savings-type insurance paid for more than 5 years and maintained for more than 10 years with a monthly premium of 1.5 million KRW or less ▲ a whole life pension insurance contract where the insurance money is received only in the form of a pension from age 55 until death, are eligible for interest income tax exemption.

For personal pension life insurance such as pension savings insurance, a tax credit of up to 6 million KRW annually on insurance premiums is available through year-end tax settlement. For those with annual earned income of 55 million KRW (comprehensive income of 45 million KRW) or less, 15% of the paid premiums can be refunded through year-end tax settlement, and for those exceeding this, 12% can be refunded, up to a limit of 6 million KRW.

Individual Retirement Pension (IRP) also qualifies for tax credits under the same income conditions. If you pay the pension savings insurance deduction limit of 6 million KRW and additionally pay 3 million KRW into an IRP, you can get a deduction of up to 9 million KRW. Even when only paying into an IRP, a deduction of up to 9 million KRW is possible. For example, a 40-year-old employee with a total salary of 80 million KRW who pays 7 million KRW annually for pension savings insurance and 2 million KRW into an IRP can receive a combined tax credit of 960,000 KRW, calculated as 12% of 6 million KRW (72,000 KRW) for pension savings insurance and 12% of 2 million KRW (24,000 KRW) for the IRP.

There are also tax credits for protection-type insurance. For employees, a tax credit benefit of 12% (13.2% including local tax) is provided within an annual insurance premium payment limit of 1 million KRW. Additionally, disability-exclusive protection insurance premiums qualify for a 15% (16.5% including local tax) tax credit.

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