What is the guaranteed insurance premium deduction in year-end settlement (연말정산), and how does it work?

Answered on : 2024-01-24

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1. **Definition**: Guaranteed insurance (보장성보험) refers to insurance policies, such as life insurance, accident insurance, automobile insurance, and other property insurances, where the amount refunded at maturity does not exceed the paid premiums. These policies are marked as deductible on insurance contracts or payment receipts for year-end settlement purposes, especially for individuals with disabilities as policyholders or beneficiaries[1].

2. **Deduction Process**: In year-end settlement, individuals can deduct the premiums paid for guaranteed insurance from their taxable income. The annual deduction limit for guaranteed insurance premiums is 100,000 KRW, and the deduction rate is 12%. For disability-specific guaranteed insurance, the deduction rate is 15%[2][5][9].

3. **Benefits**: Through this deduction, individuals can receive a refund of up to 12% (or 15% for disability-specific insurance) of the premiums paid for guaranteed insurance, leading to potential tax savings during year-end settlement[5][10].