Vietnam: What is unit-linked insurance? Contents of unit-linked insurance contract

Vietnam: What is unit-linked insurance? Contents of unit-linked insurance contract (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is unit-linked insurance?

According to Article 2 of Circular 135/2012/TT-BTC, unit-linked insurance product is a type of life insurance belonging to investment-linked insurance and have the following characteristics:

- The insurance premium and insurance benefit are separated between the risk insurance and the investment.

The insurance buyer may determine the insurance premium and the indemnity as agreed in the insurance contract.

- The insurance buyer is entitled to invest their insurance premium to purchase the units of the unit-linked fund established by the insurer, and enjoy the investment benefits as well as incur the investment risk from the unit-linked funds chosen, proportional to the insurance premium invested.

The purchase and sale of fund units are done between the insurer and the insurance buyer.

- The insurer shall receive the payment made by the insurance buyer as agreed in the insurance contract.

2. The insurance contract in Vietnam

Specifically, in Article 13 of Circular 135/2012/TT-BTC, the unit-linked insurance contract must be conformable with law and contain the following information:

- The benefit and mechanism for biding such benefit with the operation of the unit-linked fund selected by the insurance buyer;

- The investment policy and target of the unit-linked funds;

- The unit-linked funds selected by the insurance buyer, and the proportion of insurance premium used for buying the units of the unit-linked funds;

- The proportion, the specific amount, the maximum limit, and the method of calculating the fees relevant to the unit-linked insurance contract;

- The method and the period of valuation the units of unit-linked funds:

- The selection for the insurance buyer to change the risk benefit, the proportion of insurance premium distributed to the unit-linked funds, the insurance premium, the transfer among the unit-linked funds and the extension of the deadline for paying insurance premium.

- Specifying the cases where the insurer may take the measures below to protect and enhance the benefit of the insurance buyer:

+ Closing the unit-linked fund to transfer the assets to a new unit-linked fund with the same investment target;

+ Chaning the name of the unit-linked fund;

+ Dividing, splitting, or merging the existing units of the unit-linked fund;

+ Stopping valuating the units of the unit-linked fund and the transactions relevant to the insurance contract in case the transaction at the Stock Exchange in which the unit-linked fund is investing is suspended;

+ Other measures at the request of competent State agencies and laws.

When taking the measures prescribed in Point a, b, c and dd Clause 7 of Article 13 of Circular 135/2012/TT-BTC, the insurer must send report to the Ministry of Finance, and notify the insurance buyer in writing at least 3 days before the application.

3. Unit-linked insurance benefit in Vietnam

Unit-linked insurance in Vietnam has the following benefits:

(1) The benefit according to the unit-linked insurance contract must include the risk insurance benefit and investment benefit.

Depending on the agreement between the insurer and the insurance buyer, the insurer may include more insurance benefit.  The insurance buyer may not participate in investment benefit without participating in risk insurance benefit.

(2) The risk insurance benefit: the insurer and the insurance buyer shall reach an agreement on the risk insurance benefit, but the minimum benefit in case the insured dies must be ensured, in particular:

- For insurance contracts paid in a lump-sum: 50,000,000 VND, or 125% of the insurance premium paid in a lump sum (whichever is bigger);

- For insurance contracts paid periodically: 50,000,000 VND, or 5 times of the insurance premium annually paid, depending on which one is larger;

- The insurer may provide the death benefit with a indemnity lower than the minimum amount prescribed above, applicable to the insured at the age of 60 or aboce, but must not be lower than 50,000,000 VND;

- The regulation on the minimum death benefit is not applicable to the additional insurance premium prescribed in Article 8 of lawnet.vn/vb/Thong-tu-135-2012-TT-BTC-huong-dan-trien-khai-san-pham-bao-hiem-lien-ket-don-vi-23CED.html;

- The insurer may provide supplement insurance for unit-linked insurance.

The method of paying the insurance premium for the supplement insurance shall be agreed by the parties when concluding the contract.

(3) Investment benefit: the insurance buyer is entitled to invest their insurance premium in the unit-linked funds established by the insurer, and enjoy the investment benefits as well as incur the investment risk from the unit-linked funds chosen. proportional to the insurance premium invested.

(4) The insurer and the insurance buyer reach an agreement on the content and method of paying the insurance benefit upon occurrence of the insured event as prescribed in (2) and (3).

(Article 6 of Circular 135/2012/TT-BTC)

Tran Thanh Rin

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