"Ten years from now, will today's choice make you smile or cry… what if insurance became an investment?"
With interest rates falling and the stock market rebounding recently, interest in investment-type insurance is heating up again.
In particular, "variable insurance" is drawing attention as a product that goes beyond simple coverage to aim for returns as well. But as the name suggests, "volatility" is the key element. Between stability and returns, what should we choose?
In this post, I'll explain in easy terms how variable insurance is structured, how investment and coverage are mixed, and what to watch out for.
💡 What is variable insurance?
Unlike ordinary life insurance, variable insurance is a performance-linked insurance product in which the insurer invests part of the premiums in securities, and the insurance payout and surrender value change according to the investment performance.
In other words, the premiums paid by the policyholder go into a special account, and that money is managed like a fund.
As a result, the death benefit and surrender value are not fixed but "vary" with performance.
🔍 Key summary
- Provides death coverage like ordinary insurance
- Investment returns possible (linked to funds)
- If performance is good the payout rises; if it is bad, you may lose principal
📊 How is it managed?
The structure of variable insurance is as follows.
- The policyholder pays premiums every month
- The insurer first deducts business expenses (10–15%) and rider premiums
- The remaining amount is deposited in a special account and invested in stocks, bonds, etc.
- Depending on this performance, the accumulated reserve and insurance payout change daily and monthly
In other words, it is a structure in which the policyholder directly bears the gains and losses from the investment.
🧾 Example
If Mr. A, age 30, signs up for variable whole life insurance paying 300,000 won a month,
- for the first few years, because of business expenses, the amount actually invested is about 250,000 won or less
- when stock prices rise, the reserve grows → the surrender value also rises
- when stock prices fall, losses occur → the coverage amount may also fall
⚠️ Main risks
1. Loss of principal
If it is managed in equity-type funds, even your principal can be eaten away when the market crashes.
There were many cases of heavy losses, especially during the global financial crisis and the COVID-19 pandemic.
2. Burden of business expenses
For the first few years, 10–15% of the premium goes to business expenses.
Because of this, it takes a long time to earn real returns. Some policyholders still haven't recovered their principal even after 10 years.
3. Long-term holding requirement
If you cancel within a short period, the surrender value is zero or very low,
so holding it for at least 10 years is a prerequisite.
If you approach it with a short investment horizon, it is a structure in which you only lose money.
📰 Recent market trends (as of July 23, 2025)
Source: Maeil Business Newspaper article
In the first half of 2025, first-year premiums for variable insurance more than doubled year on year to 1.0724 trillion won.
This is because, as interest rates were cut and the stock market recovered, the appetite for high-return investments grew.
By contrast, first-year premiums for ordinary life insurance fell 10% to around 6 trillion won.
At a time when interest in investment products has grown, demand for variable insurance is clearly rising.
✅ Summary of pros and cons
| Pros | Cons |
|---|---|
| ✅ Combines investment returns + coverage | ❌ Possible loss of principal |
| ✅ Tax benefits (tax-free) if held for 10 years or more | ❌ High business expenses keep real returns low |
| ✅ Professional management, diversified investment possible | ❌ Refund losses if cancelled early |
🔎 Who is it suitable for?
✅ People with a long-term financial plan
✅ People who can keep it for 10 years or more, need insurance coverage and are also interested in investing
✅ People who prefer medium-risk assets and are familiar with how funds are managed
❌ People who may need the money within a short period
❌ Beginner investors for whom losing principal is a burden
❌ People who think of insurance only as "fixed coverage"
✨ One-line summary
"Variable insurance is both insurance and an investment, but it is not perfect at either. Approach it strategically."
💬 Are you thinking of signing up for variable insurance?
If you are torn between coverage and returns, share your thoughts in the comments.
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