A cancer patient in his 40s, surnamed Park, placed a 600 million won ($440,000) death benefit in an insurance claim trust for his two elementary school children. Under the arrangement, each child would receive 3 million won a month for living and education costs until graduating from high school, 100 million won each upon entering college, and the remainder after graduation. The structure was designed so that young children receive money in installments matched to their needs as they grow, rather than a lump sum.
Contracts for insurance claim trusts, which divide death benefits among survivors according to the timing and amounts they need, have surpassed 1 trillion won. The milestone comes about two years after the system was introduced.
Active insurance claim trust contracts at the three largest life insurers — Samsung Life Insurance, Kyobo Life Insurance and Hanwha Life Insurance — totaled a cumulative 1.014 trillion won as of the end of August, according to financial industry sources on the 9th. Contracts worth 141.6 billion won were signed in 2024, when the system was introduced, followed by 459.8 billion won last year. Another 412.6 billion won was added through August this year. The eight-month total already equals 89.8% of last year's full-year figure.
Under an insurance claim trust, a policyholder assigns the right to a death benefit to a trust company, such as an insurer, while still alive, and specifies who will be paid, when and how much after death. Payments can be structured as monthly living expenses or as lump sums at specific milestones such as school enrollment or marriage. A policy can also provide living expenses to an elderly spouse before passing the remaining benefit to children, or make long-term installment payments to a child with a disability.
Trusts are currently limited to general death benefits of 30 million won or more, but legislation is under way to expand the scope to dementia benefits. Rep. Lee Kang-il of the Democratic Party of Korea said on the 8th that he would introduce a package of five bills on lifetime asset management, including an amendment to the Financial Investment Services and Capital Markets Act that would extend insurance claim trusts from death benefit claims to dementia benefit claims.
The insurance industry is also calling for regulatory changes that would broaden trust eligibility to dementia and injury benefits, allowing them to be linked with dementia trusts and guardianship trusts. "If the scope of eligible benefits is expanded, insurance benefit trusts could be used not only to protect surviving family members after death but also to manage assets for older people while they are alive," an industry official said.
