New Insurance Rule Lets Policyholders Convert Death Payouts Into Lifetime Pensions (Image supported by ChatGPT)
SEOUL, Oct. 23 (Korea Bizwire) — Beginning October 30, South Koreans will, for the first time, be able to convert death benefits from their life insurance policies into a steady stream of pension-style payments while still alive — a move regulators hope will reshape the country’s aging-era financial landscape.
The Financial Services Commission (FSC) announced Wednesday that five major life insurers — Samsung Life, Hanwha Life, Kyobo Life, Shinhan Life, and KB Life — will roll out the new “death benefit liquidity” products, marking the first phase of the program.
The initial launch will cover 414,000 contracts worth a combined 23.1 trillion won, with policyholders set to receive individual notices starting October 23.
By early January, all life insurers with eligible policies are expected to join the initiative, expanding total coverage to about 759,000 contracts valued at 35.4 trillion won.
The system allows policyholders aged 55 and older with qualifying whole-life insurance policies — typically those with at least 10 years of premium payments completed and death benefits under 900 million won — to receive part of their death benefit as periodic income before death.
The Financial Services Commission (FSC)
For example, someone with a 100 million won policy who opts to receive 90 percent of that amount over 20 years starting at age 55 could collect about 1 million won in a lump-sum advance and roughly 127,000 won monthly, similar to a pension.
Participants can choose when to start or stop payments and may even reapply after early termination. The FSC said it will initially restrict applications to in-person customer centers and branches to better serve older participants and prevent mis-selling.
Insurers will also provide comparison tools showing estimated payouts based on varying conversion rates and durations, allowing customers to assess options before signing up.
Officials view the program as part of a broader effort to transform traditional life insurance into more flexible, service-oriented financial tools. The FSC described the initiative as a “test bed” for the service-based evolution of insurance products and signaled plans to grant “innovative financial service” designations where needed.
The regulator added that additional retirement-focused offerings — including tontine-style and low-surrender-value annuities — are under development and expected to launch early next year.
“The new death benefit liquidity system is designed to help older Koreans turn long-term insurance assets into stable retirement income,” the FSC said, calling it “a first step toward a more adaptive and consumer-centered insurance market.”
Ashley Song (ashley@koreabizwire.com)
