The trend is for individuals and families to cash them in to try to help to make ends meet.
Statistics have revealed that life insurance policies in Cyprus are a direct reflection of the continuing economic crisis, as 40 percent more policyholders have cashed in their policies during the first half of 2012 in comparison with the same time in 2011.
These grim statistics were released by the Insurance Association of Cyprus.
From January through June of this year, policyholders cashed in €111 million worth of life insurance, when compared to 2011, where the first six months led to the redemption of only €79 million. According to Stephie Dracos, the association’s general manager, “It’s an easy way for people to get money during the economic crisis.”
With few other options, life insurance is one way for people to get their hands on some cash.
She explained that “Banks are no longer giving out loans, the value of land is depreciating and stock prices are falling, so redeeming their policies is a simple option”. However, Dracos did caution that policyholders should only consider cashing in their life insurance in cases of financial emergency. She explained that the coverage “exists to help people out during a problem or difficult time.”
Therefore, unless the situation is truly dire, it may be in the policyholder’s best interest to hang onto the protection in case something should actually happen when the coverage is needed.
Laiki Cyprialife, a leading life insurance company in Cyprus, is well aware of this increasing trend. Chrysanthos Pantazis, an investment manager for the firm, said that “Given the current economic climate in Cyprus the policy redemptions appear higher than previous years.”
Dracos also identified a second reason that policyholders are choosing to redeem their policies. They are often also not capable of keeping up with their monthly premiums. Laiki has been making attempts to rearrange payment schedules so that it is easier for customers to make their payments and keep their policies.
Pantazis explained that the life insurance company is well aware of the financial changes that their customers are experiencing, and therefore they are making an effort to add greater flexibility to reduce monthly payments while still providing adequate coverage to meet their needs.