Just Left Alone, 12.85 Million Won Becomes 23.3 Million Won... Variable Insurance Emerges as a Star Performer in Bull Market

Variable Insurance Once Seen as a Burden
Special Account Valuations Surge Amid Stock Market Rally
Long-Term Policyholders Increasingly Weighing Cancellations and Withdrawals
Insurers Warn: "Be Cautious About Deciding Based Solely on Surrend

#In 2007, Mr. A signed up for a variable CI insurance policy with Daehan Life Insurance (now Hanwha Life Insurance). Last month, he was astonished when he opened the insurer's application (app). The special account reserves, which show the performance of his special account investment of 12.85 million won, had nearly doubled to about 23.3 million won. Variable insurance is an investment-type insurance product in which a portion of the premium paid by the contract holder is invested in stocks, bonds, etc. through a special account separate from the general account. Recently, as his current car began having frequent breakdowns, Mr. A has been considering withdrawing part of his reserves early to help fund the purchase of a new vehicle, especially as the stock market is currently strong.

Variable insurance reserves have significantly increased recently, supported by the strong stock market. Getty Images

Thanks to the strength of the domestic stock market, the total net assets of variable insurance funds are on the verge of surpassing 120 trillion won for the first time ever. As the appraisal value of special accounts rises with stock prices, more policyholders who have maintained their variable insurance for a long time are weighing whether to cancel their policies or make partial withdrawals. However, experts caution that partial withdrawals or policy cancellations can result in disadvantages, such as reduced coverage and the deduction of business expenses, so it is important to carefully review the contract terms.

According to the Korea Life Insurance Association on June 16, the net asset value of variable insurance funds at 20 domestic life insurers grew 15.6% from 100.1211 trillion won at the end of 2024 to 115.7855 trillion won at the end of 2025, and then hit an all-time high of 119.531 trillion won at the end of the first quarter of this year. In particular, the net asset value of funds invested in domestic assets grew by more than 16 trillion won, from 74.4562 trillion won at the end of 2024 to over 90 trillion won at the end of the first quarter of this year. The continued rise in stock prices has led to a significant increase in the net assets of variable insurance invested in stocks, bonds, and similar assets. The KOSPI index surged more than 90% in a year, from the 2,556 level at the end of March 2023 to above 5,000 at the end of March this year.

The stock market boom also led to increased sales of variable insurance. According to the Korea Life Insurance Association, initial premiums for variable insurance rose by 46.2% (912.4 billion won), from 1.9728 trillion won in 2024 to 2.8852 trillion won in 2025. In particular, variable annuity insurance recorded 2.0322 trillion won, while variable universal insurance reached 723.8 billion won, leading the growth. Initial premiums are an indicator of demand for insurance sign-ups, and it is believed that the stock market's strength and the resulting rise in expected returns have driven increased sales of variable insurance. Compared to 2022, when the stock market was sluggish and initial premiums totaled 990 billion won, this is a nearly threefold surge.

Up until last year, many contracts remained in loss territory, but as they turned profitable this year, more policyholders are now considering cancellations or partial withdrawals. Many variable whole life or variable CI insurance policies sold in the early 2000s experienced long periods of poor returns, with reserves often failing to reach even the amount of premiums paid in. In addition, demand from elderly policyholders who need funds for post-retirement living has also increased.

In fact, variable insurance surrender payments decreased from 12.9836 trillion won in 2024 to 11.1402 trillion won last year, but in just the first quarter of this year, they reached 3.8945 trillion won—about 35% of last year's annual amount. If this trend continues, annual surrender payments may exceed last year's total. In other words, the bull market has both boosted the sale of variable insurance and encouraged more cancellations. Surrender payments refer to the amount an insurer returns to the policyholder if they cancel the policy before its maturity.

An official at the Korea Life Insurance Association said, "In the past, many people couldn't even consider surrendering their policies because they were in a loss state, but now, as reserves have increased, consultations about canceling or partially withdrawing from policies are on the rise."

However, experts point out that policy cancellations should be approached carefully, as they can lead to gaps in coverage. For example, in the case of coverage-oriented insurance such as cancer insurance or whole life insurance, it may become difficult to re-enroll or premiums may rise significantly if the policyholder becomes older or develops a medical history after cancellation.

Partial withdrawals should also be made with caution. Not only are business expenses and risk premiums deducted, but the payout amounts for future coverage can be reduced by the withdrawn amount. While there are differences between products, business expenses for variable insurance are generally around 8-10% of the premiums paid. Furthermore, not all of the special account reserves can be withdrawn freely. The actual amount that can be withdrawn may vary depending on the number of withdrawals allowed per contract, the maximum withdrawal amount, and the minimum required reserve for each contract.

An official at a domestic life insurer said, "It is important not to focus solely on the surrender payment and cancel a contract without considering the deduction of business expenses and reduction in coverage," adding, "In particular, because partial withdrawals can reduce future coverage such as death benefits, policyholders should thoroughly check their contract terms."

This content was produced with the assistance of AI translation services.