Are you saving yourself life insurance? It is very widespread in Slovakia. Many retailers are still selling this product as saving. But is it worth investing through IE?
Already in the name is the word insurance. And it’s no coincidence. This is an insurance product where insurance is the top priority. However, there are many people who invest through IE. What are the advantages and disadvantages of investing through IE? Let’s look at this article.
Where is the money invested in IE?
It invests in various mutual funds. You can choose specific funds, mixed fund portfolios, or managed fund portfolios. A longer period allows you to choose riskier and more profitable strategies. And thanks to this, the possibility of higher appreciation.
There is no guarantee of income in the IE. Only in the case of choosing a guaranteed fund that invests in the technical reserves of the insurance company, where there is a minimum guarantee as in the capital life insurance. Since January 2014, this is a maximum of 1.9% pa
This option is designed for very conservative clients. Long-term and mainly regular investing significantly reduces the risk of investing in equity strategies and therefore it would be pity to commit money with a guarantee.
Regular investment allows for the purchase of a larger number of units at the time of declines and therefore it is advantageous to invest in riskier and more volatile funds (funds with higher fluctuations in unit price).
What can you expect?
There is no guaranteed return in mutual funds. If you want a guarantee, you have to satisfy with little. Earnings that have been achieved in the past do not guarantee that the same revenue will be achieved in the future.
Everything is based on assumptions based on long-term data from the past. I will give only indicative but realistic returns in mutual funds.
- Bond strategies – 3 to 4% pa
- Mixed strategies – 5 to 6% pa
- Equity Strategies – 7 to 8% pa
When investing in mutual funds through IE, fees are decisive. The higher they are, the more they withdraw from real yield.
Advantages and disadvantages of IE investment
The main disadvantages of investing through IE are the opaque fee structure and the limited availability of finance, especially during the first years of investment. You can also invest in mutual funds without an insurance company. This will avoid unnecessary charges.
Some people find it paradoxical that they have money out of reach and can not easily withdraw money from insurance. This may not fit everyone. Anyway, during my practice, I have met many times with people who, in addition to money in insurance, had no savings. Just a little truth will be
What do you get at the end of the insurance?
In life assurance, the amount paid on life expectancy is not guaranteed as is the case for life assurance. At the end of the insurance period, the insurance company will pay you the current value of the insurance. It is the current value of units x number. The positive difference between the invested premium and the value of the account at the end of the insurance is capital income and is taxed on income tax.
Where can we invest more efficiently?
Personally, I am in favor of ensuring that people have a good and well-established life insurance and pay as little as possible for their insurance.
I recommend using high-quality investment programs that invest directly in mutual funds. There is a transparent fee structure and a person always knows what he is paying for, what he earns and how much he has in his account.
Are you interested in how you can set up life insurance and pay as little as possible? Or are you looking for a more efficient way of saving than insurance? If you want to use the consultation, fill in the form below the article or call me directly.