How ILI Works
Investment Life Insurance (ILI, ИСЖ in Russian) is a hybrid financial product: a life insurance policy and an investment instrument combined. It is sold by banks and insurance companies.
The structure:
- The client deposits a large sum (typically 300,000 rubles or more) for a term of 3–7 years.
- 85–90% of the funds are placed in conservative instruments — bonds, deposits.
- 10–15% is used to purchase options on the growth of selected assets.
- In a “favourable” scenario, the client receives the principal plus an investment return.
- In an “unfavourable” scenario — only the principal (or slightly less).
Why It Is Not a Bank Deposit
The most important difference: ILI is not covered by the Deposit Insurance System (DIA). If the insurance company goes bankrupt or loses its licence, the client does not receive a DIA payout. ILI clients’ claims are included in the register of creditors of the bankrupt insurer alongside other creditors — and receive payment proportional to the remaining assets. If assets are insufficient, they may receive next to nothing.
A real example. A client placed 5,000,000 rubles in an ILI product under the impression it was “safe.” The insurance company lost its licence. In the bankruptcy proceedings, assets were sufficient to satisfy 4% of claims. The client received approximately 200,000 rubles — 4% of 5 million.
Other differences:
- Early exit from an ILI product involves substantial penalties (the “surrender value” is typically 70–85% of the amount invested),
- The guaranteed return is generally zero or close to zero,
- Investment returns are not guaranteed — they depend on the performance of selected assets.
How to Avoid the Trap
Ask directly: “Is this a bank deposit or an insurance product?” Bank employees are obliged to answer honestly.
Check the documents. A bank deposit is documented by a deposit agreement. An ILI product is documented by an insurance contract. These are fundamentally different documents.
Confirm DIA protection. Ask whether this placement is covered by the deposit insurance system. If not, you are taking on the credit risk of the insurer.
Check the early exit terms. If you may need the money before the term ends, an ILI product is highly disadvantageous for you.
What to Do If You Were Already Sold an ILI Product
Within 30 days of entering into the contract, a “cooling-off period” applies: the policyholder is entitled to cancel the contract and demand a full refund of the premium paid. Exercise this right if you discover the product does not match your expectations.
After 30 days, early termination involves losses — but sometimes it is better to crystallise a loss now than to keep money in an unsuitable instrument for years.
Read Also
- 673,000 Rubles in Frozen Pension Savings: What Is Happening and What You Can Do
- Selling Securities to Repay a Loan? Use the Three-Year Tax Exemption Lawfully
Were you sold an ILI product as a bank deposit, or do you want to understand the terms of an agreement you’ve already signed? Contact us for a consultation — we analyse insurance contracts and help recover funds during the cooling-off period or through litigation.