What is life insurance in gold?

Exchange rate fluctuations and high inflation threatens to devalue the cumulative life insurance. Taking advantage of the confusion of inhabitants, the insurers have offered them the opportunity to accumulate the most hard currency – in gold. How risky such insurance and how much profit they can make an investor?

Probably, if such inflation does not make sense to buy life insurance or join a pension fund. But to accumulate retirement capital is still needed. Heard that insurance companies offered a new product – life insurance in gold. Its price varies depending on the growth of gold prices on world markets. So I think now: is it worth buying such a policy, or better to continue to keep money on deposit?

Insurance denominated in gold – a new “feature” of the Ukrainian Life Insurance Market. Choosing as the currency of insurance “yellow metal”, the investor makes payments to the company in the hryvnia at the rate of gold, set by the National Bank at the moment.

The insurer, in turn, buys on the client’s money precious metal by placing it on the “gold” deposit in the bank. Thus, making money for 10-20 years, the policyholder can get the equivalent of a rather weighty bullion, and probably more.

Upon expiration of the contract the company pays him a “gold” equivalent, ie the amount that she could help out by selling the metal at the rate applicable at the end of the policy.

In fact, life insurance in gold – an alternative to “gold” deposit. But in this case the client gets more and more insurance protection as well as benefits in the form of a tax credit.

On the one hand, the product seems interesting, because in the past 10 years, gold has increased in price by more than 200%. On the other – even insurers themselves acknowledge that the purchase of “gold” policies involve certain risks. Firstly, the yield of “gold” deposits in banks today is quite low and the average is 1-5% per annum. This means that on such an insurance program to guarantee our clients a familiar return of 4% per annum is almost impossible, especially for 10 years or more. In this case, in the best position may be just the insurance companies affiliated with banks. These insurers can count as good interest on the “gold” deposits, and at a profitable rate of purchase and sale of metal. At best, the company can guarantee the customer 2.3% of revenue, if at all zero. However, the work “to zero” insurer may not: as we have said, by law, he is obliged to ensure profitability for at least 4% per annum.

Therefore, insurers who risked buy such a program can rely only on the rise in the price of the asset in the global market. But analysts argue that the long-term forecast the movement of metal prices to a bank – a very thankless job.

After all, the price of gold is subject to strong fluctuations and depends on many factors. This economic situation in Europe, America and Asia, and the cross-rates of the leading foreign currencies (dollar, euro), stepping is the discount rate at the Central European countries, America, Asia, the price of oil and other natural resources. Bullion market in Ukraine reflects the situation of world markets, precious metals – if the price on world markets fluctuates, so what happens in Ukraine.

For example, last year the currency fluctuations and instability in the global economy have played into the hands of investors – the rise in prices to “yellow” metal in 2007 was about 27%. At the same time, this year, gold is behaving more cautiously. According to NBU, since the beginning of the official exchange rate of gold has risen by only 4.32% (as of June 23). And only since the beginning of the current quarter rate fell to 8.49%, and the beginning of the month – by 0.74% (as of June 23).

In the second half of the experts expect that “Gold Rally” again to resume. The impetus for the further growth of prices for precious metals have become, in their opinion, again, high inflation and further weakening the dollar.

However, insurers are left to customers to a sharp drop in gold prices to convert an insurance policy in the U.S. or Euro-currency, as well as the hryvnia.

But we must be alert to the possibility that a decision today to translate “metal” savings into monetary units, to make it right tomorrow – not. The procedure for changing the currency occurs only on the basis of the quarter.

Insurance life insurance companies have the right to buy another currency assets after the Financial Services Commission will submit reports. And only then can apply to the authorized bank to purchase the relevant currency equivalent.

In addition, all costs associated with the sale of gold and currency purchase – paid contributions to the pension fund, bank commission shall be borne by the customer. “As a result, the policyholder can lose about 4% of the amount of reserves that will be transferred to another currency.

Another snag is that, under the rules of accommodation allowance, approved by the Financial Services Commission of Ukraine, “layfovye” Insurers can not be placed in the precious metals for more than 10% of total reserves.

This means that when a large influx of insurers competing for “gold” policies, the company simply can not satisfy everyone. Otherwise, having exhausted the limit of 10%, the SC will be compelled to place reserves into other assets, violating thus the article under the law on insurance currency exchange reserve, which may lead to serious sanctions by the Financial Services Commission.

As with any life insurance, “output” investor will have to pay 15% of the revenue the insurer (for the conduct of the case). Plus the infamous tax on income – the same 15% from 60% of revenue.

Of course, part of the insurance payments can be returned by issuing a tax credit, but it still turns out that the costs of “golden” policy involves too many, and the yield was not giddy. Much easier to carry money in the bank for the same “gold” deposit and did not suffer. No tax or other fees to the “gold” investors will not be charged. The only benefit of the golden insurance – protection (paying the insured amount) in case of death or disability of the investor. However, as this “black day” will be worth gold – it is unknown …

Should I buy life insurance in gold?

PLUS

- Gold may rise significantly in price
- In addition to increasing the price of an asset, you can still get and insurance protection against death or disability

MINUS

- Gold may fall in price
- Costs for the services of an insurer and taxes are very high

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