What is investment life insurance and how does it work?

Investment life insurance (ILI) is an opportunity to earn on long-term investment of money. This type of insurance is issued in the form of policies with a validity of 3-5 years. At this time, the bank invests money in a specific exchange index. Its growth determines the potential benefit of the insured person. In addition, the life of the investor is insured for the entire duration of the policy..

How does investment life insurance work??

Investment Life InsuranceIIS is an extended service that allows you to potentially increase funds and insure life.

The insurer, during the term of the concluded contract, invests your funds in stocks, bonds and other exchange assets. Under the contract of life insurance, the main insurance risks are death for any reason and the expiration of the contract.

Upon the occurrence of one of these conditions, the insurer pays the amount corresponding to the insured event. For example, some companies pay compensation of 200% upon death from an accident, and 100% under other conditions..

ILI contracts are concluded for a period of 3 years. In accordance with the terms of the contract, the insured can transfer the insurance premium at once or in periodic payments. In addition, the terms of the policy may include the possibility of independent choice of investment options..

Briefly, investing in ILI gives:

– Protection of capital. The insurer gives a 100% guarantee on the return of the invested amount.
– Ability to increase funds. The amount of the return payment grows in accordance with the index.

Upon the death of the insured, his relatives receive compensation. A distinctive feature is that the money invested through the policy is not in the possession of the client, therefore, they are not arrested at the request of the court and are not divided upon divorce.

What is the approximate return?

investment life insurance

Investment life insurance does not guarantee return on invested money. The amount of funds received at the end of the policy period is formed on an individual basis and depends on the participation coefficient and the dynamics of the exchange rate.

The participation rate is a fractional number or percentage that determines how much of the return the insured person receives.

Here is an example. Livelihood contract with investment in the S index&P 500. The policy is issued in rubles, but the base currency of the index is the US dollar. The participation rate is 0.5 or 50%. Over three years, the index grew by 80%, and the dollar exchange rate changed from 50 to 70 rubles. Accordingly, the client’s income will be (80% * 0.5) * 70/50 = 70% for the entire period or 23.3% per year.

Accounting for changes in the exchange rate allows you to accurately link the ruble deposit to the exchange rate of the currency in which the index is traded. This ensures that the invested $ 100 in three years does not turn into $ 80. The participation rate is fixed at the conclusion of the contract and will be maintained throughout its term. But it can change for customers who want to get new policies..

What assets are invested in with LIS?

investment life insurance

With investment insurance, the money of the insured person is invested in the largest stock indices:

– STOXX Europe 600 Personal & Household Goods – European consumption index. The index basket includes 600 of the largest European companies, including Adidas, Henkel, Swatch, Dior, Unilever, etc..

– s&P 500 – an index called the “thermometer of the American economy.” It is formed on the basis of capitalization of the 500 largest open companies in the United States, including Procter&Gamble, MacDonald’s, Google, Apple, Ford, Intel, General Electric, etc..

– NASDAQ 100 is a high-tech index whose value is determined by the position of the largest technology companies in the world. This includes Google, Microsoft, Apple, Facebook, Tesla, etc..

For a rough estimation of potential profit, an indicator of the yield of the underlying index is proposed. This figure shows the index change in recent times, equal to the duration of the contract.


You can draw up a BCI and evaluate the profitability of indices through Tinkoff Investments


Terms of Early Termination

Depending on the terms of the contract, upon premature withdrawal of invested funds, the client receives only part of the insurance premium back. Moreover, the earlier the contract is terminated, the lower the amount:

– 1st year – 70-83%;
– 2nd year – 81-88%
– 3rd year – 90-94%

What percentage of investments is returned subject to investor loss?

investment life insurance

The meaning of the investment insurance contract is to guarantee the safety of money during its validity. The company guarantees a 100% refund of the contribution at the end of the contract. Even if the stock index that was selected for investment has not shown growth, the full amount will be paid.

Why the insurer guarantees a refund?

To ensure profitability and fulfillment of obligations to customers, the insurance company divides the amount of the contribution into the guarantee and investment part. The first is invested in bonds, and the second in stocks and stock indices. Due to the consistent growth of the warranty part, payments are made.

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