As many as 40 percent of households plan to save on insurance

Individuals contracting non-life insurance are not inclined to cancel or refrain from renewing insurance policies, as these insurances protect high-value assets from a range of risks for relatively little money.

Written by: Mislav Nekić
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Not so long ago, just five years ago, my life was a fairy tale. I had a steady job, lived with my parents, and had enough money for more than a decent life. The number of friends increased in proportion to my rising income. Then I received a call from a ‘friend’ from elementary school. ‘Oh Mislav! How are you? What’s new with you?’ Honestly, I didn’t know who she was or why she was calling me, but full of myself, I agreed to her invitation to have coffee ‘in the name of old times.’ Of course, during coffee, I found out that she was actually not my friend, but knew a girl whose boyfriend has a friend whose neighbor sat four desks in front of me in elementary school. She explained to me that she was a freshman, studying economics, interested in finance, and therefore was part-time selling life insurance for the most famous xy company. ‘It’s a super thing. You pay six thousand kunas a year, in twenty years it will double, and you won’t have to worry about retirement. Moreover, after just five years of payments, the insurance policy will be your guarantee for a loan. If you’re not satisfied, after five years they will return your money. You know what’s the best? If you die before the end, you don’t have to pay until the end, and the person to whom you transferred the policy will receive the full contracted amount that you would have had to pay for years,’ she dictated in less than a minute. I didn’t understand anything, and to every question I asked, she replied: ‘Those are just formalities.’ In the end, she took me to an office above the café and offered me a contract to sign. Not wanting to offend the neighbor who recommended me (I still don’t understand why he thought of me), I signed a premium of six thousand kunas a year, or ‘only’ 500 kunas a month plus ‘only’ about fifty kunas a month for injury insurance, and so for 20 years. Finally, she asked me to recommend about ten friends who might be interested in a super offer like mine, which I did.

Painful breakup

Today, after five years, I think about independent living, my circle of friends has shrunk with the decrease in my income, and life, like for most citizens of Beautiful Croatia, is not a fairy tale. Rising inflation, prices of goods and services are increasing day by day, and we are forced to watch every lipa. A recent GfK survey showed that citizens will mostly give up drinks, food, driving cars, and similar everyday life needs. As many as 40 percent of households like mine will try to save on insurance costs. However, as simple as it may seem, the question is how to save on insurance? Personally, a few months ago, I called an old friend from the beginning of the story. She asked me who I was, saying that she doesn’t sell any insurance, but women’s cosmetics. I had no choice but to call the insurance company and tell them that I no longer wanted to pay and that I wanted to withdraw all the money I had paid so far. I found out that the situation was not quite as my ‘friend’ had described. I can withdraw money, but only a smaller part of what I paid. If I stop paying, I will lose everything, and the insurance company will sue me because I authorized them with my signature on the contract. To prevent this article from turning into a daily lament, we investigated whether there is hope for us and whether we can still save without terminating the insurance policy contract?
– In classic life insurance, a certain number of clients always do not want to continue paying the agreed premium. In that case, they are offered two options. Capitalization of insurance or cessation of premium payments. The contracted amount under the policy is reduced in accordance with the premium paid up to that point. The policy remains in force and continues to provide all agreed coverage – explains Sonja Miočić, director of the Marketing and Public Relations department at Allianz.

Usual capitalization

Capitalization is a common procedure for all insurance companies. After the policy is capitalized, it can be renewed within 12 months from the expiration of the month for which the last premium was paid. The buyout of insurance is the termination of insurance with the payment of the policy’s surrender value. This is a less favorable option for the client because the policy is terminated, and thus all insurance coverage for which it was concluded ceases, and the client is paid only a part of the funds paid (because the premium included the cost of risk). The surrender value of the policy depends on the duration of the insurance and the premium paid up to that point. If a client wants to terminate the policy just because they need money at a certain moment, Allianz also offers a short-term loan (the policy remains valid as agreed). As another option, the client can take a pawn loan from the bank based on their policy.
– Experience shows that individuals contracting non-life insurance (apartment, house, car, etc.) are not inclined to cancel or withdraw from insurance policies because these are insurances that protect high-value assets from a range of risks for relatively little money – says director Miočić.
In Croatia osiguranje, they say that any termination of insurance before the expiration of the policy is considered a termination of the contract and is unfavorable for the policyholder. If the policyholder stops paying the premium, the insurer can terminate the contract if, for insurance lasting 14 years or less, the premium has been paid for less than two years, or less than three years if the insurance was contracted for 15 years or more. In these cases, the premium paid up to that point is not returned to the policyholder. Also, the insured amount can be reduced if the conditions for capitalization are met.

Reduction of premium

What changes can be introduced to the policy during the duration of the insurance? In classic mixed life insurance, changes to the insured amount, premium, duration of insurance, method of premium payment, beneficiaries for survival, and beneficiaries for death are possible during the duration of the insurance. In property insurance, during the duration of the insurance, changes such as assignment, increase and decrease of the insured amount, place of insurance, and insured items are possible. The only condition related to the wishes of the insured regarding changes to the insurance policy is that the insurer must be informed of the desired changes in a timely manner. As alternatives to defer payments for some time without terminating the contract, Croatia osiguranje says that the policyholder who stops paying the premium can renew life insurance within 12 months from the expiration of the month for which the last premium was paid. The policyholder can also choose to capitalize the policy. In capitalization, life insurance remains valid, even though the premium is not paid, but with a reduced insured amount, and the policyholder still participates in the distribution of the insurer’s profits.
So how can one save without terminating the life insurance contract? Personally, I agreed to reduce the premium, which, as unfavorable as it seemed to me, was a better choice than a legal battle with the legal team of my insurance company or jumping under a train, which would automatically grant my heirs the insured amount.