SEOUL—In a bold bid to address its staggering elderly poverty crisis, South Korea will launch a groundbreaking initiative allowing life insurance policyholders to access up to 90% of their death benefits while alive, transforming traditional life insurance into a critical retirement income stream. The program, set to debut in October 2025, comes as 39.8% of South Koreans aged 65 and older live below the poverty line—the highest rate among OECD nations.
Administered by the Financial Services Commission (FSC), the program will enable eligible policyholders aged 55 and older to withdraw funds from their life insurance policies without health restrictions, a departure from typical “accelerated death benefit” (ADB) clauses tied to terminal illnesses. Major insurers including Hanwha, Samsung, Kyobo, Shinhan, and KB are collaborating to operationalize the framework, which targets approximately 759,000 policies worth 35.4 trillion won ($25.3 billion).
Eligibility criteria include:Fixed-rate whole life insurance contracts with death benefits capped at 900 million won.A minimum premium payment period of 10 years, with all premiums fully paid.Policyholders must be the same individual as the insured, with no outstanding policy loans.
Policyholders can choose between a lump-sum payout in October 2025 or monthly installments starting early 2026. The latter option will allow beneficiaries to receive up to 90% of the total death benefit, including amounts exceeding paid premiums. For example, a 55-year-old who paid 28.8 million won over 20 years for a 100 million won policy could access 90 million won (90%), leaving 10 million won for heirs. Under the monthly plan, they would receive 32.74 million won over 20 years—a 13% return on premiums.
The FSC lowered the eligibility age from an initial proposal of 65 to align with the country’s demographic realities. South Korea became a “super-aged society” in 2024, with over 10 million citizens (20% of the population) aged 65 or older—a proportion projected to double by 2050. By allowing withdrawals at 55, the program aims to address income gaps during pre-retirement years, a critical period when many face job instability or health-related expenses.
Insurers are also expanding beyond financial payouts. Next year, they plan to introduce service-type products converting death benefits into elderly care services, such as nursing home stays, caregiver support, or health vouchers. KB Life, for instance, already operates senior housing complexes and nursing homes under its “KB Golden Life Care” brand, positioning it to integrate these services seamlessly.
The initiative reflects a broader push to stabilize senior incomes amid structural challenges. Despite recent pension reforms raising contribution rates to 13% and expanding credits for military service and childbirth, South Korea’s elderly poverty rate remains nearly three times the OECD average. The FSC estimates the program could provide monthly payouts of 140,000 won ($100) to eligible seniors, offering a lifeline for those living alone or reliant on minimal state support.
“By transforming death benefits into retirement income, we’re not just solving financial gaps—we’re redefining how life insurance serves aging societies,” said an industry representative involved in the task force. “This is a proactive step to prevent seniors from falling into destitution as healthcare costs rise and family support systems weaken.”
Insurers will notify eligible policyholders via SMS and KakaoTalk starting in October, with dedicated personnel at physical branches assisting in the transition. While in-person meetings will initially dominate, digital channels will expand in 2026 to accommodate demand. Policyholders retain the right to revoke their decision, ensuring flexibility amid economic uncertainties.
As South Korea grapples with a shrinking workforce and rising longevity, the program signals a paradigm shift in social safety nets—one where private insurance becomes a cornerstone of elderly welfare. With similar models under consideration in aging economies globally, the initiative’s success could shape future policy frameworks beyond its borders.
Related topics:
