Endowment life insurance is a way of not becoming rich, not becoming poor if health problems affect your ability to work.

One of the most effective modern methods of protecting citizens is cumulative life insurance.

In the developed countries of Western Europe and America, such financial instruments are quite popular among the population, citizens systematically make the appropriate payments and take full advantage of such programs.

In Russia, endowment life insurance (hereinafter NSH), as a financial product, appeared not so long ago and is still mistrusted of it.

Accumulative Life Insurance

What it is? How it works?

The accumulative life insurance contract is concluded with the insurance company for a long period of time, it allows you to protect the life of the insured person, accumulate funds in his account and guarantee him financial stability in the future.

By concluding a contract, a person undertakes to regularly deposit funds into his account, the bulk of which is accumulated and allows you to create capital by the end of the contract period.

All contracts are concluded on a voluntary basis.

Program shares are distributed as follows:

  •  The risk part is the amount the client is insured for, is paid to him only upon the occurrence of an insured event, otherwise the client does not receive any compensation.
  •  The funded part is long-term insurance, in which you can not only protect yourself from possible risks, but also increase cash assets. Insurers offer a variety of options for such policies that cover different types of risks, including death and surviving to a specified age.

Differences between cumulative life insurance from risk :

  • the company invests the cumulative part of the contributions, and shares the return on investment with the client;
  • accumulation along with accrued interest, the policyholder receives at the end of its validity;
  • designed for a longer time period;
  • insurance premiums can be paid not once in a monthly payment, but once a quarter or a year.

With the right approach, endowment life insurance can be a serious alternative to financial instruments such as deposit and investment fund. But, in comparison with other ways of investing money, endowment insurance has undeniable advantages in terms of profitability and reliability.

Advantages over Bank Deposit

Advantages over Bank Deposit

A bank deposit cannot be considered as a long-term financial instrument, while an NSA agreement is concluded for a period of 5 to 40 years. The second important advantage of the policy is indexation – a mechanism of protection against the influence of inflation and the ability to maintain the real value of the contract.

In the unstable financial situation, bank customers are interested in the safety of funds, and only then profitability. Endowment life insurance is a high guarantee of the safety of savings, as well as ensuring the profitability of the deposit.

Nevertheless, the primary task of a financial product is to protect life, and not a way to generate net income. The funds accumulated in the account are more of a bonus than an investment.

The principle of operation of the NSG

Endowment insurance works as follows: the client makes a decision on how much he would like to accumulate and the period necessary for this. By making regular contributions to the contract, he begins to create capital.

By concluding an agreement with a profile company, the client undertakes to make contributions throughout the entire period of its validity, that is, to invest in this company.

The term of the contract can be from 5 to 20 years and the primary goal is to protect the interests of the client from the risks associated with his life and health.

Risks may be as follows:

  • injuries of varying severity;
  • disability acquisition
  • loss of opportunity to work;
  • death.

The main value of the policy is human life and health, it guarantees the accumulation of savings in the budget of his family. The amount that the subject of the contract will receive upon the occurrence of an insured event is calculated individually and directly depends on the size of contributions.

We can say that the cumulative life insurance policy guarantees the receipt of funds in the family of the insured person, regardless of whether the policyholder himself will live up to the agreed expiration date:

  • if a person survives, then at the time the contract expires, he receives the capital accumulated by him independently;
  • if the insured person does not live up to the specified date, then the insurance is paid to his family immediately.

Endowment life insurance consists of the main program and additional options.

The insurance premium includes two components:

  • invested income;
  • guaranteed income.

Consider their fundamental differences.

Guaranteed Income

Guaranteed Income

This is the profit that the insured person will receive upon the expiration of the contract. Possible accumulation does not exceed 4-5%, which correlates with the current rate of inflation.

Therefore, you should not consider this amount as net income – it is rather a way to keep your savings in a reliable institution, to protect them from depreciation as a result of inflation.

Invested Income

It is invested income that makes endowment life insurance an attractive financial product.

According to the legislation of the Russian Federation, insurance companies can use clients’ money for investing (except for aggressive, risky investments). Profit from investing activities can be about 10% per annum.

Having received funds from the client, the insurance company divides them into two parts, most of which is invested in conservative assets, in order to guarantee the return of funds to the owner by the time the contract expires. The second part is invested at the discretion of the insurance company.

You need to understand that the invested income is not a guaranteed profit on the deposit. It will depend on the success of the company, can not be predicted.

If the investment is successful, then the client can make a significant profit, if it is unprofitable, then this will not affect the size of the guaranteed part.

Who should buy a policy

Who should buy a policy

There are categories of people who just need to think about purchasing a life insurance policy:

  • the sole breadwinner of the family;
  • young parents in order to collect an impressive amount for the child’s majority, and also provide him financially;
  • those who are thinking of an impending retirement but are not able to make serious investments;
  • if it’s difficult for a person to save money, then regular payment disciplines him;
  • for those seeking long-term investment opportunities.

It is not worthwhile to purchase a housing insurance policy for those who want to get a quick profit in a short period of time due to a profitable investment.


The main advantages are:

  •  The permanent conditions of the contract, i.e., the tariff and risks for insurance are determined at the time of conclusion of the contract, they do not change until the end of its validity.
  •  Tax deductions (may amount to 13% per annum of the amount of contributions).
  •  Long deposit period.
  •  Convenience – with the help of one agreement, the accumulation of money, their safety and protection against force majeure is ensured.

In case of death of the insured, the amount of payment is not included in the inheritance, but is transferred to the beneficiary.


The main disadvantage is the long agreement period, i.e. the client does not have the opportunity to terminate the contract without financial loss.

Risk insurance provides compensation for the case of premature termination of the contract, with accumulative this amount is slightly lower. Big inflation “eats” insurance premiums, which can lead to negative consequences for a person.

Low efficiency as a way to create capital is another drawback.

The revocation of a license from an insurance company at the state level, the sale of business, changes in domestic policy in the country – all this cannot be predicted in an unstable economy.


The following conclusions can be made:

  • Endowment life insurance is a way of not becoming rich, and not becoming poor if health problems affect working ability;
  • this is an opportunity to protect the family from material problems in case of loss of a breadwinner;
  • this is a way to secure your savings in case of emergency.

Modern companies offer various conditions for endowment life insurance programs, before choosing one of them, you need to understand in detail, it is advisable to seek the help of a lawyer.

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