August 26, 2025
SEOUL – South Korea’s rapid transformation into a super-aged society has brought a stark consequence: elderly poverty. About 38 percent of Koreans over 65 live below the poverty line, the highest rate in the OECD, leaving many retirees struggling to make ends meet.
To ease the strain, the government plans to allow insurance policyholders to tap death benefits while still alive, turning payouts once reserved for heirs into retirement income.
The Financial Services Commission said Tuesday it is reviewing a plan to let policyholders access their benefits from age 55, starting in October. A task force with five life insurers — Hanwha, Samsung, Kyobo, Shinhan and KB — has been formed to roll out the system.
Regulators had initially considered 65, the age at which national pension payments begin, but lowered the threshold to bridge the income gap in the years prior to that. The average retirement age in Korea is 53.
The new administration has made the shift part of the national agenda to stabilize incomes for senior citizens as Korea grapples with rapid demographic change. The country became a super-aged society last year, with more than 10 million people — one-fifth of the population — over 65. That share is projected to double by 2050.
Officials say the reform could have a sweeping impact, potentially covering about 759,000 insurance policies with a combined 35.4 trillion won ($25.3 billion) in benefits to be made accessible during a policyholder’s lifetime. Eligible contracts include fixed-rate policies with death benefits of 900 million won or less, payment periods of at least 10 years, and premiums paid in full.
Policyholders will be able to withdraw amounts in excess of the premiums they paid, capped at 90 percent of the benefit. They can opt for either a yearly lump sum or monthly installments. The lump-sum option starts in October, while monthly payments will begin early next year after system upgrades.
For example, a 55-year-old who paid 28.8 million won over 20 years for a 100 million won benefit could liquidate 70 percent, leaving 30 million won for heirs. The policyholder would receive 140,000 won a month until age 75, totaling 32.74 million won, about 4 million won more than the paid-in premiums.
“Life insurance was once dominant when fathers were the sole breadwinners and death benefits provided security against unexpected loss,” an industry official said. “With families diversifying and single households on the rise, channeling death benefits into late-life funds gives life insurance a new role as a source of income, even for seniors living alone.”
Service-type products that turn death benefits into elderly care — such as nursing home admissions, caregiver services or health care vouchers — will be introduced next year after a government review.
This new offering is anticipated to benefit life insurers, which are expanding senior care services to capture growing demand and offset weakening sales of traditional life insurance.
As service-type products are expected to rely on insurers’ own facilities early on, those with their own networks will likely benefit the most. KB Life has led the sector with its KB Golden Lifecare brand, which runs a senior housing complex, four nursing homes and two care centers. Shinhan Life also plans to open its first elderly care facility next year.
Samsung Life is set to launch a dedicated subsidiary this year, with expectations that it will scale up quickly by leveraging its conglomerate-backed capital and ties to Samsung Group’s medical units. Hana Life, KDB Life and Kyobo Life have also established senior care subsidiaries over the past year.
“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.
