Life insurance in Cyprus in 2024. A complete guide.

Life Insurance Cyprus

Life insurance protects your spouse and children from the likelihood of serious financial losses that could result if something unforeseen happened to you.

It provides financial security and helps to pay for debts, living costs, and medical or final expenses.

Various types of life insurance policies are provided in Cyprus, but the most popular are term and whole life insurance.

In Cyprus, the life insurance premiums of policies are significantly lower than in other European countries.

In this guide, we will help you to understand how the life insurance market works in Cyprus. We will also explain the main types of insurance and their characteristics.

By the end of this article, you will know which insurance is right for you. We will guide you to pick the best plan according to your insurance needs.

Table of contents

What is life insurance?
Types of life insurance in Cyprus
How much life insurance do I need?
Life insurance tax deductible
Life insurance cost in Cyprus
Affordable life insurance in Cyprus
Best life insurance in Cyprus
Online life insurance in Cyprus
Life insurance quotes

What is life insurance?

How does life insurance work in Cyprus?

Life insurance is an insurance contract signed between a policyholder and an insurance company.

The policyholder pays the premium, and in case of his death, his heirs receive a predetermined lump-sum amount (called death benefit or life cover).

This lump sum amount helps to secure your family’s future needs.

In addition, there are also life insurance plans containing a savings component that helps you save money for your pension.

Why life insurance is important

Life insurance is indispensable for family persons with dependents (i.e., small children or a spouse who does not work), those with a mortgage, and keyman personnel in companies.

It is also an excellent tool for saving and protecting your income from tax.

Types of life insurance in Cyprus

When you start looking for life insurance in Cyprus, you’ll need to ask one question right away: what type of life insurance is best for me?

To get you started on your search, here’s an overview of types of life insurance and the main points to know for each.

What are the different types of life insurance?

These are the types of life insurance available in Cyprus:

Term life insurance
Permanent life insurance
Whole life insurance
Universal life insurance
Keyman insurance
Group life insurance

Term Life Insurance in Cyprus

Term life insurance is a type of life insurance policy with a specified end date, such as 20 years from the start date.

With this cover, the death benefit will only be paid out if the insured dies during the specified period.

Advantageously, the premiums remain the same during this period even though the insured gets older.

Choices of term life coverage lengths are generally 5, 10, 15, 25 or 30 years.

Term insurance is the cheapest life insurance option because you’re buying only insurance coverage and not paying for cash-value life insurance (see whole life insurance below).

Term life insurance is ideal for people who want life insurance coverage for a specific debt or situation.

For example, some people buy it to cover their working years as an income replacement for their family in case they pass away.

Some people buy term life to cover the years of a mortgage or other large debt.

The primary type of term insurance in Cyprus is level, decreasing, and convertible.

Decreasing Term Life Insurance in Cyprus

Decreasing term life insurance in Cyprus is a term life policy that includes a death benefit that gets smaller over time.

Decreasing term life insurance in Cyprus is mainly used to cover a repayment mortgage’s balance because the total balance decreases over time and will be paid off in full at the end of the term.

Unlike standard term insurance, the premium of this type of insurance decreases over time.

Because of this, it is cheaper than other term life insurance policies, making it a viable way to protect against significant shorter-term expenses.

Example

You take out a €500,000, 30-year decreasing term life insurance policy to help your spouse continue making your mortgage payment in case you pass away unexpectedly.

The death benefit is set to decrease by 3.33% per year for the life of the policy. If you die after ten years, the payout would be around €350,000 or 30% of the original death benefit.

Pitsas Insurances provides the most affordable decreasing term insurance option in Cyprus.

Banks in Cyprus usually try to convince their mortgage clients to acquire traditional term insurance (i.e. fixed premiums) from their affiliate insurance company, whose overall cost is significantly higher.

Customers shouldn’t forget that they have the right to choose any plan that is more profitable, and if the bank threatens to increase the interest rate of their mortgage, they can complain to the Commission for the Protection of Competition in Cyprus.

Convertible Term Insurance in Cyprus

Convertible term insurance is a level term insurance with an additional benefit called “conversion option”.

The policyholder is given a ‘conversion option’, meaning they can convert the cover into a new longer-term policy without the insured having to undergo a medical examination or provide evidence of good health at the time of the conversion.

Convertible term life insurance is more expensive than simple level term insurance since the insured will not have to undergo a medical examination.

The insurance company must continue the policy even though the insured might be seriously ill (even terminally ill).

In Cyprus, convertible term insurance is converted to whole life insurance by default.

When converted, the premium of the insurance is increased significantly since whole life insurance also includes a cash value.

The premium of this insurance is stable during the duration of the contract.

In Cyprus, the conversion option can be activated before the age of 60 years old.

Whole Life Insurance in Cyprus

Whole life insurance, also known as Saving Insurance or Unit Linked Insurance, is a permanent type of policy.

Unlike term life, permanent life insurance is a term for policies that do not expire.

Whole life insurance in Cyprus provides coverage throughout the insured person’s life.

In addition to paying a tax-free death benefit, whole life insurance also contains a savings component in which cash value may accumulate.

Practically, the insurance premium of whole life insurance is spent in two ways:

The non-refundable amount that is paid for the life insurance death benefit (mortality cost). This amount is lost.
The amount that is used for saving purposes.

In Cyprus, whole life insurance policies exclusively guarantee covering the death penalty amount.

The savings amount is invested in investment funds, and the returns vary.

Apart from offering significant tax deductions, a private pension can ensure a lower risk and a higher net return than certificates of deposits.

You can read our analytical guide about whole life insurance for more information. To read more about whole-life insurance in Cyprus, click here.

Keyman Insurance in Cyprus

Also called key man or key person insurance, keyman insurance is an essential option for businesses wanting to insure their core employees.

Key person insurance aims to financially support a company to operate if a core team member suffers a disability or passes away.

In essence, a keyman insurance policy helps the company to recover from losing an employee and helps replace them.

Keyman life insurance in Cyprus is often required by lenders and investors and those cooperating in a business at management level.

Keyman insurance can be a lifeline for your company if you lose a key employee.

See our article here if you’d like to learn more about what this insurance can offer you.

Group Life Insurance in Cyprus

Group life insurance is offered by an employer to its workers or members.

Group life insurance often has a low coverage amount and is offered as part of a larger membership or employer benefit package.

Members of a group life policy do not need to undergo a medical examination and are not subject to individual underwriting.

How much life insurance do I need?

There are many ways to define the insured amount for your life insurance. The most widely used of these ways are the following:

Comparing your financial obligations with your liquid assets.
The rule of 10.

Comparing your financial obligations with your liquid assets

To use this method, you can use the following equation.

Required Insured Amount (Death Benefit) = Financial obligations you want to cover – Existing liquid assets that can be used toward bills.

Here are considerations for the “financial obligations you want to cover”:

A mortgage: You can include your mortgage’s balance to give you peace of mind. If income replacement (below) would already cover mortgage payments, you don’t need to add more mortgage money.
Income replacement: To do this, multiply the salary you want to replace by the number of years you need to replace it. Income replacement should cover current and future expenses.
Children’s university tuition: You should add tuition money to ensure your children can pay for their education if you pass away.
Other large debts: Add in more money if your family might struggle with other large debts if you die unexpectedly.

Here are factors to consider for “existing liquid assets that can be used toward bills”:

Savings: To do this, subtract any savings your family would use to pay expenses, for example, whole life insurance and financial assets.
Existing life insurance: If you have other life insurance, subtract that amount.

Rule of 10, Life Insurance Cyprus

To use this method, multiply your annual income by 10.

This method is a rule of thumb that applies to the average family. It helps you to form a general idea about the required insured amount.

In any case, it is best to ask a professional financial planner to help you understand your insurance needs in the context of your budget constraints.

Life insurance tax deductible in Cyprus

In Cyprus, all life insurance contracts are tax deducted. Specifically, 20% of an individual’s taxable income can be exempted from taxation (in 2024, this is expected to increase to 25%).

The eligible expenses for tax exemptions are:

Social insurance contributions.
General Health System contributions.
Life insurance premiums (a maximum 7% of the death benefit).
Private medical insurance premiums (a maximum 1,5% of salary).
Pension and provident fund contributions (a maximum 10% of salary).

To understand this, we’ll illustrate a simplified example.

(For a free personalised tax planning analysis, send an e-mail to: [email protected]).

Let’s consider an individual with the following characteristics.

Salary	€70,000
Social Insurance contributions	€4,500
General health system contributions	€2,000
Life insurance annual premiums	€8,500
Life insurance insured sum	€100,000

His total net income is €70,000 since he does not have other sources of income (i.e. rents).

Government expenses eligible for tax exemptions = social insurance contributions + general health system contributions = €4,500 + €2,000 = €6,500.

Eligible tax exemptions: The 20% of his net income is 20% * €70,000 = €14,000.

If we deduct from the eligible tax exemptions, the government expenses eligible for tax exemptions = €14,000 - €6,500 = €7,500.

Practically, this means that the amount of €7,500 can be used for life insurance premiums.

Nevertheless, to be fully tax-exempted the amount of €7,500 should also incorporate the eligibility criterion of 7%.

Eligibility criterion of 7%: We can use only 7% of the insured amount for tax insurance purposes. Since the insured amount is €100,000, the 7% is €7,000, which is less than €7,500.

The €7,000 is the amount that will be deducted from the taxable income and not the €7,500.

Therefore, the total exemptions that can be deducted from the applicant’s income is:

Social Insurance Contributions + General Health System + Life Insurance Premiums (limited to the 7% of the insured amount) = €4,500 + €2,000 + €7,000 = €13,500.

Effectively, his taxable income is €70,000 - €13,500 = €56,500.

Practically, this means that without life insurance, his taxable income would be €63,500, and he would have to pay an additional €2,275 for income tax.

If he wanted the whole amount of €7,500 to be deducted from his tax income, then he should increase his life insurance insured sum to €107,000 (7% of €107,000 = €7,500).

If you want to analytically calculate the ideal savings amount to achieve maximum tax exemption on your own, you can use our online calculator.

Life insurance cost in Cyprus

Life Insurance Cyprus cost

The following factors define the cost of life insurance in Cyprus:

Age. The higher the age, the higher the cost.
Pre-existing medical conditions.
Past medical conditions. Past medical conditions might affect the insurance’s value depending on the disease’s severity. For example, if the applicant suffered from cancer in the past, even though he had fully recovered, insurance companies might refuse to insure him or increase the premium significantly.
Gender. Women pay less than men due to their higher life expectancy.
Medical history of parents. If the applicant's parents suffer from pre-existing conditions or inherited diseases or died at a young age, the insurance premium will also be higher.
Weight. Obese or overweight people (according to the BMI ratio) face increased premium rates.
Regularly smoking and drinking alcohol increases the premium.
Saving amount. What is the amount you want to save per month? A licensed insurance adviser can help you to define the amount you want to save.
Death Benefit amount. The maximum limit of coverage (death benefit) that someone can request is limited by age and income. Requesting a high death benefit should be justified by a high income.
Dangerous and extreme sports increase premiums (e.g. skydiving, bungee jumping, mountain climbing, canyoning and diving).
Additional benefits (i.e. riders) also increase the insurance cost (i.e. critical illness coverage, and permanent disability benefits).

Affordable life insurance in Cyprus

Life insurance premiums in Cyprus are comparatively low compared to other European countries.

The insurance industry in Cyprus is not fully-fledged. Insurance companies want to incentivise people to insure their lives, especially young people and businessmen.

Insurances are comparatively lower as insurance products in Cyprus are not levied with VAT.

Lastly, life insurance policies are recognised for tax exemptions for both individuals and companies.

Cheap life Insurance Cyprus

If you are looking for an affordable policy, Pitsas Insurances can help you find cheap life insurance in Cyprus.

Best life insurance in Cyprus

There are no life insurance policies that are superior to others. Each insurance policy has different advantages and disadvantages.

As discussed, there are many types of life insurance products suited to every need, so finding the correct one for you can be a difficult task.

To simplify the process, our experienced insurance consultants analyse your needs and budget constraints and work to find you the best option.

Online life insurance in Cyprus

Pitsas Insurances is a reputable online insurance provider with over 35 years of experience.

We are insurance experts in Cyprus and can walk you through a hassle-free process to buy life insurance online.

Life Insurance Cyprus

Life insurance is a complex product that requires careful assessment by our underwriters. We make your insurance buying process as simple as possible with a quick turnaround.

Please complete our online questionnaire, and we will send you an offer within a few hours.

Life insurance quotes

Pitsas Insurances cooperates with many reputable life insurance underwriters and can help you compare the best life insurance quotations.

Life insurance underwriters in Cyprus are classified into two categories: local and international companies.

The life insurance policies of each do not differ significantly. They have the same terms and similar premiums, as the competition is pretty tight.

Nevertheless, international companies have some significant advantages:

They pay the amount much quicker with less bureaucracy.
They are more reliable.

Since these large international institutions care about their reputation significantly, they will pay the death benefit to their clients’ heirs directly.

At Pitsas Insurances, we compare the terms and the premiums of all policies provided in Cyprus.

Life Insurance Cyprus

See here to learn more about life insurance in Cyprus and our product offerings.

Pitsas Insurances Team