10 core issues about savings insurance
2024-05-22
57 CommentsIn the past two years, savings insurance has really caught on, and many people are eager to try it out.
However, when it comes to insurance, one cannot just dive in blindly.
If you haven't understood these 10 core questions about savings insurance, do not make a hasty decision!
This content is a bit extensive and very basic,
but it is crucial for a comprehensive and systematic understanding of savings insurance, so be sure to read it all the way through.
If you have friends who are currently looking into savings insurance, it is also recommended to share this with them.
1. What is savings insurance?
Savings insurance is a type of insurance that comes with savings features,
providing protection against the risk of not having enough money for future needs such as retirement, children's education, and family finances.
2. What types of savings insurance are there?I have organized several common types of savings products, such as annuities, increasing whole life insurance, and so on. To facilitate everyone's understanding of the differences, I have made a table.
Annuities are a type of product where you invest a lump sum at the beginning, and start receiving payments according to an agreed schedule. The amount and timing of future payments are clearly stated in the contract and will not change. Because the payments are relatively fixed, they are more suitable for specific milestones like retirement and education. They can be used as dedicated family funds or for retirement and children's education funds.
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Increasing whole life insurance is essentially life insurance, but because the coverage amount keeps growing, it also has savings functions. It mainly accumulates cash value through the appreciation of money, and if you want to use the money later, you can withdraw it at any time, with the amount you take being under your control. Due to its greater flexibility, it can be used for a variety of purposes, such as emergency funds or long-term savings.Can be used for family asset savings, pension reserves, children's education funds, and marriage funds;
It can also be used for wealth inheritance or as a means of large asset isolation.
Universal products, in essence, are life insurance, which can be understood as the investment activities of the funds in the investment accounts established by the insurance company for the policyholder.
They offer the highest flexibility, but are rarely sold separately.
Currently, the guaranteed return is around 2%, and the variable returns still depend on the investment performance of the insurance company.
In addition, there are dividend-type products that are commonly seen this year.
They can enjoy dividends based on the current operating status of the insurance company.
The principal will not be lost, and it is generally a fixed + dividend model, with a guaranteed return of over 2% in China, and with dividends, it can even reach 3.5%;
However, the dividend part is not fixed and is suitable for friends with a higher risk preference.
3. What is the current yield rate of savings insurance?The comprehensive return rate of savings insurance can reach around 3%.
Many people might not have a clear concept of this 3%, so let me briefly explain.
Bank deposits are simple interest, and currently, the six major banks might only offer around 2%.
If you deposit 100 this year, you'll get 102 next year, and future interest rates may even be lower.
In contrast, this savings insurance is compound interest, which is "interest on interest," inherently earning more than a deposit.
More importantly, among similarly compound interest products, such as the ultra-long-term 30-year government bonds from a while ago, the return rate is only 2.57% compound interest, while savings insurance can achieve 3% or even higher, for life, directly outperforming, with a significant advantage.
4. Why can insurance companies offer such high returns?To find out the answer, we must first understand how insurance companies actually make money.
We often say that there are three main ways insurance companies earn money: mortality profit, expense profit, and interest profit.
Among them, interest profit is the most core method of making money.
Interest profit mainly comes from investment returns.
Insurance companies will take the premiums paid by policyholders to invest,
The money obtained from the investment, after deducting the promised returns, costs, and so on, is the profit.
With 20 billion in investable premiums, even a 1% profit would amount to 200 million.
The key point is that this premium fund is of high quality, capable of investing in some very profitable projects,
For example, the South-to-North Water Diversion Project and the Beijing-Shanghai High-Speed Railway are top-notch cash cows, and it is quite easy to provide a 3% return to everyone.
5. Compared to savings, which has a higher yield: savings insurance or deposits?The returns on savings insurance are definitely higher than those on deposits, and the safety is sufficient; the most important thing is the ability to lock in interest rates.
Remember when savings insurance offered 4%, everyone was indifferent because bank wealth management could achieve 6% or even higher. But now, bank deposits are only around 2%, while savings insurance can still reach 3%, and may even maintain 3% indefinitely. Who is higher and who is lower is clear at a glance.
6. Is savings insurance safe?
It must be safe.
Many people have a concern when purchasing savings insurance: if I put my money here, will you run away?Nature will not.
Because aside from deposits and government bonds, insurance is almost the safest product available.
The China Banking and Insurance Regulatory Commission (CBIRC) imposes requirements on insurance companies regarding the use and management of funds, ensuring comprehensively that they will not suddenly go bankrupt.
Moreover, even if an insurance company does go bankrupt, to provide a safety net for everyone's policies, the policies will be directly transferred to a designated insurance company.
Additionally, savings insurance typically falls under life insurance policies, protected by the "Insurance Guarantee Fund".
Even if the insurance company goes bankrupt, the policies will be legally transferred to another insurance company, and their effectiveness will remain intact.
7. Is savings insurance guaranteed to return the principal? Can it be redeemed early?
Strictly speaking, it is guaranteed to return the principal.
However, if one makes unwise decisions and surrenders the policy before breaking even, they may incur a loss.Because the returns of savings insurance are clearly stipulated in the contract, the cash value for which year and how much can be taken, and the annuity for which year and how much can be received are set in stone.
Even if the policyholder passes away before receiving the benefits, the amount received will at least be guaranteed not to be lower than your principal.
Additionally, there is no such thing as early redemption for savings insurance.
If funds are needed, you can consider surrendering the policy, reducing the coverage, or taking out a policy loan; all these methods can achieve liquidity for the savings insurance.
8. Can savings insurance combat inflation?
It mainly depends on the state of economic development.
Many people believe that insurance can definitely combat inflation, or that it completely cannot keep up with inflation, but both views are too absolute.
For example, from 1996 to June 1999, our insurance companies sold a lot of high-interest policies, with an average interest rate that could even reach 6.9%.
This rate is obviously not enough to look at during the years of rapid economic growth in China, let alone to combat inflation;
But with this figure in the present, can the 6.9% compound interest combat inflation?Everyone should have a clear idea by now,
Currently, 3% of the products are the same.
9. How much money should we allocate to purchase savings insurance?
It mainly depends on these factors.
Firstly, asset and liability.
For example, how many loans does the family have to repay? How much liquid capital is on hand? And how much capital can be used for savings insurance?
Secondly, cash flow and life cycle.
For example, is the outlook for the profession and industry good? Can the current job and salary be stable and continuous? Will there be a risk of unemployment in the future that leads to an inability to continue paying the premiums?
Thirdly, retirement planning and expectations.
For example, how much pension do you want to receive per month after retiring in the future? If you delay retirement, how much should you save in advance for the pension?Finally, risk management.
For instance, if the emergency funds are already in place, should the risk of major illnesses be considered as well?
Taking these factors into account to estimate one's own situation, once the financial status and planning expectations are clear, it is roughly known how much money should be allocated to purchase savings insurance.
10. What kind of people are suitable for purchasing?
The scope of savings insurance is quite broad, whether it is for asset allocation, children's education, marriage, or retirement, it can basically meet the needs.
Overall, it is more suitable for the following three types of people:
The first type is for retirement preparation, to save a sum of money for oneself or a loved one for retirement;
The second type is for children's preparation, wanting to save an education fund for the child, or future housing fund, marriage expenses, etc.;
The last type is for those who want to save and invest money, but do not like risks, do not like high-risk financial management, and want to save money regularly every year, engaging in long-term risk-free financial management.In conclusion:
Regarding savings insurance, this article serves as a very basic explanation, and I hope it has been helpful to everyone.
In practice, if you really want to purchase a particular savings insurance product, you can first check whether it meets your own needs and demands.
When it comes to product selection, it is best to consider various aspects:
Is the return on investment the most important? Or is cash flow more critical? Do you need flexibility in the later stages? Or are you more interested in the additional benefits of a certain product?