Hanoi-Vietnam: 03 differences between social insurance and life insurance

Difference

Social Insurance (SI)

Life Insurance (LI)

Purpose

- Non-profit insurance type;

- Ensure replacement or compensation of a part of the employee's income when they suffer from income reduction or loss due to sickness, maternity, occupational accidents, occupational diseases, unemployment, reaching retirement age or death.

- Profit-oriented insurance type;

- Insurance for human life or health to provide financial protection for individuals and families.

Conditions and participation fees

- Vietnamese citizens from 15 years old and above;

-Not subject to compulsory SI;

- Pre-determined contribution rate of 22% into the pension and survivors' fund.

Require meeting age and health conditions at the time of signing the contract: From 18 years old at the time the contract takes effect and having full civil act capacity.

Benefits

- Contributions to the SI fund are adjusted annually according to the consumer price index (CPI);


- SI participants, when dead or disabled for any reason, the period of paid SI is recognized to calculate SI benefits;

- SI participants, when receiving a pension, the pension amount is periodically adjusted according to the consumer price index and economic growth. During the pension period, the employee is paid for health insurance by the SI fund and enjoys medical examination and treatment benefits equally with everyone else, regardless of the contribution amount or type of illness;

- When an SI beneficiary passes away, the funeral organizer receives a funeral allowance equivalent to 10 10-month statutory pay rate at the time of death, and relatives enjoy survivorship benefits.

- LI contributions are calculated according to the market interest rate;

- The company is not required to pay insurance in certain cases:

+ Death by suicide within 02 years from the date of the first premium or the date the insurance contract resumes effect;
+ Death or permanent disability due to intentional fault of the policyholder or the beneficiary;
+ The insured dies due to the execution of death penalty;

- Benefits are implemented as per the signed contract;

- If the insurance company goes bankrupt, participants may lose all benefits.

Thus, participating in SI offers superior benefits compared to LI, most notably in terms of pension benefits for SI participants in old age when they no longer have the ability to work and generate income.