Investment Insurance (FAQ)
What is investment insurance?
Investment insurance policies are two-for-one investment plans. Under an investment insurance plan, when you pay your premium, a part of it gets invested after a specific timeframe.
As the value of your premium increases, your investment also increases.
Investment insurance provides financial security and economic growth opportunities for the insured. It comprises two main parts: the insurance plan and investment.
Specifically, investment insurance is categorised within a broad category of unit-linked funds like savings insurances (e.g. saving and investment units).
Savings insurance allows policyholders to save and invest money to secure their future.
Savings plans are financial insurance products designed to provide stable returns supporting your financial goals.
Using a standard insurance policy, you and your beneficiary receive the policy’s benefits after a specific event. However, in the case of investment insurance, you receive a return from your insurance policy before a particular event.
Investment insurance ensures you get a profitable return on investments and financial protection.
How does investment and savings insurance work?
As noted, savings insurance falls under unit-linked funds (saving and investment units).
Insurance companies create these unit-linked funds, gathering policyholders’ money to pass the control to large investment banks (e.g. Credit Suisse, JP Morgan, etc.) and investment companies (e.g. Vanguard, Pimco, etc.).
These investment banks and companies are then responsible for investing the money into various savings and investment products.
Investors essentially buy units (or shares) of these investment funds, enabling them the opportunity to invest in a wider range of investments than if they were to invest alone.
The cost of the saving units is determined by the value of the financial and deposit products the policyholders’ money is invested in.
The goal of each fund will influence which products to invest in.
Common goals set by savings funds are usually split into three categories:
- Low-risk, conservative
- Medium-risk, moderate
- High-risk, aggressive
The most popular option out of the three is low-risk funds. This option places an investor’s money into government bonds and certificates of deposits with a high solvency rate (>AA+), resulting in minimum fluctuation.
It is compulsory for insurance companies to regularly update their clients about the value of their fund’s investment policy and investment units, and the updates must also be published in private Cypriot newspapers.
To read more about saving and investment funds, see our blog here.
To learn about the T&Cs of savings insurance in Cyprus, read this blog.
How does this type of insurance work in Cyprus?
In Cyprus, savings insurance and private pensions are the only non-government saving plans accepted by Cypriot tax authorities as valid tax exemptions.
All company owners who are tax residents of Cyprus and high-salaried employees registered in the Social Insurance system of Cyprus can benefit from the tax exemptions.
A private pension can also ensure a lower risk and a higher net return than certificates of deposits.
Do companies offer group savings insurance in Cyprus?
Currently, there is no legal framework for companies to offer group pension or savings plans in Cyprus.
However, several companies offer private savings programs to their employees, which function as private pensions.
The difference between these group plans and public pensions is that a pension is paid as a lump sum during retirement. Monthly private pensions, or annuities, are expected to be adopted in Cyprus around 2024.
With group private pensions, the investors can’t access their funds before retirement.
For more information regarding private pensions in Cyprus, read our blog.
What are the benefits of investment insurance?
Since their rise in popularity after 2015, savings insurance plans and private pensions have become a sought-after choice in Cyprus.
Based on the Superintendent of Insurance’s statistics in Cyprus, over 65% of professionals with an income higher than €40,000 have a savings plan (March 2022).
The main benefits of savings insurance include attractive tax deductions, highly professional management, the level of discipline to save for a long-term goal, and the flexibility and ability to have immediate liquidation.
Due to the risks involved, making savings through these products should always be undertaken with the guidance of professional investment advisors.
The most significant risks of saving insurance plans include market risks and inflation, capital consolidation risks, and liquidation and settlement risks.
You can read more about the benefits and risks of these plans on our blog here.
Why are insurance investment programs worthwhile?
Including the benefits noted above, the following reasons make insurance investment programs worthwhile.
- Tax exemptions
- Diversification of money
- Saving funds for future use
- Creation of an emergency fund
- Capital accumulation for retirement
- Capital accumulation for children’s education
For 35 years, we have provided clients access to secure global investment funds.
Our funds are managed by the finest investment managers in the world, including Pimco and Vanguard. Our client’s assets are exclusively invested in the financial products of countries and companies with the highest credit rating (>AA+).
The Cypriot tax authorities accept all our investment programs as valid tax exemptions.
To read more about savings and investment insurance in Cyprus, see our article here.
To receive a free investment insurance quote, see our website here.
For advice regarding saving insurance and private pensions, contact one of our specialists by email here: [email protected].
Pitsas Insurances Team