Dividend insurance has become a rising star in the insurance market.
With the era of low interest rates, it’s predictable that such products—offering both a guaranteed floor and potential dividends—will grow increasingly popular and attract more buyers.
This type also reveals only half the truth, emphasizing high illustrative returns like 3.6% or 3.7% while omitting that dividends are not guaranteed.
It’s akin to job hunting, where sales positions often promise monthly earnings of tens of thousands, but in reality, high commissions depend on performance. Similarly, dividend insurance has a fixed return component and an uncertain dividend component. Whether dividends meet or exceed expectations depends on the economic climate and the insurer’s investment capabilities. If a salesperson presents projected dividend returns as guaranteed, they are either unprofessional or untrustworthy—either way, steer clear. Of course, these aren’t the only sales tactics for dividend insurance, but covering them all isn’t practical. Don’t worry, though. Avoiding pitfalls is simple. Today, we’ll share Shenlan Bao’s internal screening process. 2. Real Case Demonstration: A Step-by-Step Guide to Buying the Right Dividend Insurance Let’s use a real product to demonstrate the screening process. Step 1: Check the Guaranteed Return The guaranteed return is the “floor” of a dividend insurance policy, like a base salary—the higher, the better. How to calculate it? On the product page, locate the cash value column (excluding dividends). Using this, you can determine the IRR at different ages and the break-even point—all contractually guaranteed. For example, a “30-year-old woman paying ¥50,000 annually for 5 years” has the following guaranteed returns: Growth: By year 7, the cash value reaches ¥260,000, exceeding the total premium of ¥250,000—no loss if withdrawn then. Guaranteed IRR: 2.18% at age 60, 2.26% at age 70. How does this compare? Currently, policies with a break-even within 10 years and mid-to-late-term IRRs around 2.2% are considered solid. Step 2: Calculate Dividend Returns After checking guaranteed returns, dividend projections matter. The process is similar: assess when funds become accessible and the expected returns. Note: Some products offer dividend options, typically these two:Dividend as Sum Insured: Dividends are converted into additional sum insured, increasing the base for future dividends. Over the long term, this results in higher overall returns.
Cash Dividend: Dividends are paid out annually in cash, offering greater flexibility in usage. Under cash dividends, there are additional options: dividends can be left with the insurer to accumulate interest at a specified rate, or used to purchase paid-up additions, similar to the “dividend as sum insured” approach. Different methods yield varying calculation processes and results. For this product, you can choose from three options: cash withdrawal, interest accumulation, or paid-up additions. At age 70, the returns for these three methods are 3.60%, 3.40%, and 3.66% respectively. If achieved, these figures represent strong market performance. When calculating, note that cash dividends involve annual cash inflows, resulting in distinct cash flow patterns. Additionally, the current interest accumulation rate is 2.5%, subject to future adjustments. If calculations remain unclear or errors are a concern, consult a professional planner via the link at the end of this article. Step 3: Review Historical Fulfillment Rates Since dividends are not guaranteed, the calculated results from the previous step should not be taken at face value. A reliable reference is the product’s historical “dividend fulfillment rate,” indicating whether projected dividends were fully realized. For example, if a projected dividend of $100 results in an actual payout of $80, the fulfillment rate is 80%. A payout of $120 would mean a 120% fulfillment rate. To check this rate, visit the insurer’s official website and follow the illustrated steps. For instance, one company disclosed its dividend performance over the past two years: 100% fulfillment last year and 70%-90% this year. This performance is exceptional, as regulatory restrictions on high dividends this year caused many insurers to drop to around 30%, while this company maintained higher payouts. Concerns about dividend caps are addressed in a separate article, explaining their rationale and how to calculate real returns under such limits. Step 4: Assess Company Strength Fulfillment rates reflect past performance and cannot predict the future. To gauge future prospects, evaluate the insurer’s strength based on: – Shareholder background – Comprehensive investment return rate – Solvency adequacy ratio – Risk composite rating These metrics are available on the insurer’s official website. For example, the company underwriting this product demonstrates robust financial health.Jointly established by a large state-owned enterprise and a renowned British insurance company, this product boasts a strong background and top-tier investment capabilities in the industry. Its stable operations and AAA risk rating place it among the highest tier.
From this perspective, the product appears highly attractive, offering high guaranteed returns, excellent dividend projections, and a high likelihood of achieving those dividends, given the company’s solid track record and reliability. However, this product is no longer available for purchase. Using it as an example aims to shift focus toward selection methods rather than the product itself. By mastering these steps, you will be equipped to evaluate any type of dividend insurance in the future and determine its worthiness. 3. Recommended Dividend Insurance Products Currently Available For those seeking dividend insurance without extensive comparisons, here are four outstanding products still on the market: All recommended products demonstrate strong overall performance. Consider their features and strengths when making a selection: – **Star Fortune Home**: Higher guaranteed returns than competitors, with superior projected returns at a 100% realization rate. – **Star Fortune Home (Dividend Type)** – Fosun Bund Life Insurance – Life Insurance – Annual effective coverage increase of 2.5% – Dividend by sum assured – High projected returns – View review – **Joyful Wealth Plus**: Lower entry threshold, starting at just ¥5,000 across all terms, ideal for incremental investments while maintaining high overall returns. – **Joyful Wealth Plus (Dividend Type)** – China Post Life Insurance – Life Insurance – Annual effective coverage increase of 2.5% – Dividend by sum assured – View review – **Ruixiang Legacy**: Includes 10 years of free nursing services for hospital or post-discharge care by certified professionals. – **Ruixiang Legacy (Dividend Type) (Liduo No. 3)** – Cigna CMG Life Insurance – Life Insurance – Annual effective coverage increase of 2.5% – Dividend by sum assured – View review – **Hongli Prosperity**: The company ranks among the top in comprehensive investment capabilities, with extensive experience in dividend insurance and no notable weaknesses. These recommendations are based on a thorough screening process, evaluating: – Guaranteed returns and dividend projections, all of which are strong, with quick breakeven points for cash value. – Soft metrics like dividend realization rates, shareholder background, and solvency. For example, China Post Life Insurance, despite slightly lower investment returns due to transitional restructuring, ranks fifth in premium revenue domestically. After establishing China Post Asset Management, its investment performance has improved, achieving a 6% comprehensive investment return this year.06%, showing strong potential.
Moreover, its two major shareholders are China Post and AIA, which enhances trust and security due to their reputable brands and solid financial backing. Other insurance companies also excel in shareholder background, investment returns, and solvency, making the future dividend outlook generally optimistic. IV. Final Thoughts In a low-interest-rate era, savings insurance with guaranteed returns and dividends is highly attractive, but this doesn’t mean it should be purchased impulsively. In fact, blindly buying the wrong product is far more detrimental than missing out on a good one. Therefore, regardless of whether dividend insurance is favorable or about to be discontinued, it’s crucial to remain rational and deliberate before making a decision. If you decide to proceed, it’s advisable to act before the end of the month, as waiting until October will significantly reduce the guaranteed returns.
