South Korea is set to allow life insurance policyholders to draw on death benefits while alive, aiming to mitigate widespread elderly poverty.
Currently, around 38% of South Koreans aged 65 and older fall below the poverty line, the highest proportion among OECD nations, leaving many retirees financially vulnerable.
According to Asia News, the Financial Services Commission confirmed that it is reviewing a framework enabling withdrawals from age 55, starting in October.
A task force including five major insurers – Hanwha, Samsung, Kyobo, Shinhan, and KB – has been created to develop the program.
Regulators initially considered setting the minimum age at 65, coinciding with national pension eligibility, but lowered it to provide support during the years prior to pension receipt.
The average retirement age in the country is 53.
Authorities estimate the reform could apply to roughly 759,000 insurance contracts, unlocking a total of 35.4 trillion won (US$25.3 billion) in benefits that could be accessed during policyholders’ lifetimes.
Policies eligible for early access include fixed-rate contracts with death benefits up to 900 million won, a minimum 10-year premium payment period, and fully paid premiums.
Policyholders can access amounts exceeding the premiums they paid, capped at 90% of the total benefit.
Options include a one-time lump sum, available in October, or monthly instalments beginning early next year after system updates.
For example, a 55-year-old who contributed 28.8 million won over 20 years for a 100 million won policy could draw 70% of the benefit, leaving 30 million won for heirs.
Monthly payouts would total 32.74 million won over 20 years, slightly above the premiums contributed.
An industry representative said converting death benefits into retirement income provides seniors, including those living alone, with an additional source of support.
“Life insurance was once dominant when fathers were the sole breadwinners and death benefits provided security against unexpected loss,” they said, as reported by Asia News. “With families diversifying and single households on the rise, channelling death benefits into late-life funds gives life insurance a new role as a source of income, even for seniors living alone.”
The government plans to introduce products allowing death benefits to fund elderly care services, including nursing homes, caregiver support, and healthcare vouchers.
Insurers are preparing to meet demand through facility development.
KB Life operates multiple senior housing and care facilities, while Shinhan Life aims to open its first elderly care centre next year.
Samsung Life is creating a subsidiary to expand senior care offerings.
“With life insurance markets slowing, we expect that liquidating death benefits will not only expand customer options but also create new business avenues for insurers,” an industry official said, as reported by Asia News.
South Korea’s life insurance sector is projected to grow steadily, reaching 206.2 trillion won (US$157.9 billion) in direct written premiums by 2029, up from 182.7 trillion won (US$139.8 billion) in 2025, representing a 3.1 percent compound annual growth rate.
Analyst Prasanth Katam of GlobalData noted that slow economic growth in 2023 restrained demand for life insurance, but a forecasted recovery in 2025 is expected to support products such as whole-life and pension policies.
