All kinds of insurance services have long and firmly entered our lives. Every year we protect our health with policies, we must insure the car, and sometimes we purchase additional programs. Endowment insurance is one of the few services that the vast majority of Russians do not have a clue about. While in European countries such a policy is commonplace and even to some extent necessary. For many years of practice, people are used to saving money in this way. Moreover, the housing insurance policy protects the most valuable that a person has - his life and health.
Although human life is priceless, this does not mean that it is not necessary to value it. Approximately this way of thinking is every third European. It is because of this that cumulative life insurance in Europe has been developing for many years.
What it is?
Such a policy is a bit like a deposit. HOA - a long-term investment of funds with their subsequent accumulation and investment for surplus income.
Such an agreement can be concluded from 3 to 35–40 years. It can be considered as a kind of piggy bank, which additionally protects you from costs in case of death, serious illness, injury, disability and other likely risks. If any of the above happens to you, the company will pay you the full amount. If all goes well, funds will continue to accumulate.
Monthly contributions to endowment insurance are divided into two parts:
- to pay for probable risks;
- on the formation of a piggy bank.
The cumulative part can be invested in various financial models in order to generate auxiliary income. After the contract expires, the client can independently decide whether he wants to receive the entire accumulated amount at one time or prefers uniform payments in the form of an increase in pension.
If we talk about Russian legislation, it can be argued that such amounts are not subject to taxation. It is also impossible to recover them in favor of third parties, even in court. That is, the client himself and no one else can dispose of the funds. Insurance (funded) in Europe has almost the same benefits.
What is the difference between risk insurance and funded insurance?
A risk policy is understood to mean this type of contract when the insurance amount is paid 1 time. At the same time, a rather large amount is prescribed in the contract, which will be paid to the client upon the occurrence of an insured event. However, if nothing happened to you before the end of the contract, the deposited money remains with the insurer.
The situation is different when the insurance is funded. In Europe, you purchased a policy or in Moscow, it does not matter. Here the money will have to be paid monthly. If you have free funds, you can pay the amount immediately for the year.
The company accumulates funds in your account continuously invests and tries to increase. This is precisely the insurer's income. Money is redistributed into two types of income:
- Guaranteed. The income here is quite small, it can vary from 3 to 5%.
- Additional. This part will depend on how successfully the company was able to invest your funds. This can be either 2% or 15%.
If the insured event still occurred, the client immediately receives the entire amount prescribed in the document. It doesn’t matter how much money he managed to contribute.
For example, you have entered into an NSA agreement for 10 years and must contribute $ 5,000 annually. But two years later you had an accident, became disabled and lost your ability to work. Under the terms of the contract, you will receive all of $ 50,000, despite the fact that only $ 10,000 managed to deposit. If nothing bad happened to you in all ten years, the company will return you all 50 thousand and even charge some interest from above, if this is provided for by the contract. That is why insurance is funded. In Europe, one in three has such a policy. Let's see why.
Historical reference
The first insurance policies appeared in ancient Greece. But in Europe, this phenomenon became popular only at the beginning of the XVIII century. The progenitor of life insurance was James Dodson. He personally traveled around all the cemeteries in London and rewrote the dates of life and death at all graves a year ago. Thus, he calculated the approximate life expectancy of the average Londoner and calculated exactly what size the insurance premium could be. But only after 77 years, insurance (funded) in Europe became more or less massive. Since then, insurance organizations offering this service have become much larger. And some of them work to this day.
Current affairs
About 70% of all payments today fall to the UK, Germany, Italy and France. Most companies in this segment have a solid reputation and vast experience. It is this fact that makes accumulative life insurance so popular.
Insurance companies cover almost the entire population with their services. In eight out of ten families, all members, including infants, have policies. Some Europeans have several insurances at the same time with different conditions of accumulation. On average, Europeans spend up to a quarter of their income on insurance programs. Here, a similar tool is an excuse to accumulate additional funds for a child’s education and increase in pension. Therefore, cheerful grandparents, traveling around the world and cheerfully clicking cameras, no longer surprise anyone. They can afford it.
European law allows customers to invest exclusively in the accounts of major banks or in shares of profitable enterprises. Responsibility of the Insurance Company is additionally guaranteed by international reinsurance companies. This means that in any case, the money of clients will not go anywhere. With such a level of reliability, such insurance is akin to a very profitable deposit.
Single European Insurance Market
As you probably understood, endowment insurance in Europe is a very responsible matter. As early as the middle of the 20th century, several European countries began to form a single insurance market. The central authority is called the European Insurance Committee, and its head office is located in Brussels. The objectives of this event are quite serious:
- development of common standards for the work of all organizations that deal with insurance;
- implementation of the strictest control over compliance with the agreements reached.
Organization Requirements
Organizations providing insurance services must adhere to these rules:
- it is prohibited to additionally engage in any other type of activity, except for the provision of insurance services;
- top managers and company owners are obliged to bear full mandatory liability for customer losses, have no criminal record and sacredly honor the letter of the law;
- the company is required to have a guarantee fund capable of providing all necessary payments.
To date, any insurance company licensed to provide insurance services in any EU state can offer similar services in other countries, members of this union.
Popular companies
The list of the most popular European companies providing cumulative insurance (the reviews they have are the most positive) look something like this:
- Munich Re - Germany;
- AXA - France;
- Powszechny Zakład Ubezpieczeń (PZU) - Poland;
- Assicurazioni Generali - Italy;
- Vienna Insurance Group - Austria;
- GRAWE - Austria;
- Allianz - Germany;
- Legal & General Group - UK.
These companies offer a large selection of diverse programs for both adults and children. Using one of them, you can easily save money in case of disability or for any specific event (training, wedding).
In the middle of the last century, the so-called investment insurance began to gain momentum in Europe. Its main difference from the funded one described by us is that during the entire term of the contract the client can independently dispose of the funds. That is, you can decide for yourself where to invest money and where not. But there is a negative point: the owner of the policy also bears responsibility for the decision.
Conclusion
It is likely that over time, the practice of endowment insurance in Russia will become as popular as in Europe. And soon, Russian citizens will appreciate the literal meaning of the expression “value of life”.