With declining interest rates, bank deposit returns continue to decrease, and the stock market remains highly uncertain. In contrast, savings insurance offers stable and decent returns, quietly becoming a popular “money-saving tool” for many. However, behind its popularity lie many lesser-known “pitfalls.”
For instance, “intending to deposit money in a bank but ending up with an insurance policy” or “being misled into buying a dividend policy, only to find the actual returns fall short of the agent’s promises.” Often, these issues stem not from the products themselves but from deliberate misrepresentation by certain insurance sales personnel. To help you avoid these pitfalls, let’s examine the most common misleading sales tactics in savings insurance and bridge the information gap. 1. Misleading Tactic 1: Deliberate Omission Leading to Mismatched Products There are various types of savings insurance. When selecting one, the first question to ask is: What is my purpose for buying this policy? Retirement? Children’s education? Or wealth preservation? The product should align with your goal. A casual approach like “just treating it as savings” without considering the product’s features can lead to poor choices, wasting money without achieving the desired outcome. Examples: 1. “Bought insurance for retirement, but ended up with no income in old age” Annuities for retirement fall into two categories based on payout periods: – Lifetime payout: Payments continue as long as you live. – Fixed-term payout: Payments are made for a set period (e.g., 10 years, 20 years, until age 80 or 106). Choosing the wrong type may leave you without income in later years. For example, Mr. Wang intended to buy a retirement annuity but mistakenly purchased a fixed-term policy. It provided annual payouts of ¥10,000 from age 60 to 65, followed by a lump sum of ¥644,000 at maturity, after which the contract terminated. While the total premium paid was ¥500,000, and he received over ¥600,000 by 65, the issue lies in the lack of income afterward. Without proper planning, he could exhaust the funds in his later years. Avoidance Tip: Retirement quality depends on cash flow, not lump sums. According to the latest “Fourth Life Cycle Table,” the average life expectancy for men is 84.46 years and 90.08 years for women. In an era of longevity, a stable cash flow that lasts a lifetime is crucial. When selecting a retirement annuity, opt for lifetime payouts or at least coverage until age 100+ to avoid cash flow disruptions in old age. 2. “Bought an education fund for my child, only to find it can’t be accessed until they turn 60!” A decade ago, Mr. Xie from Xi’an purchased an “Oriental Red · Zhuangyuan Red” policy for his daughter’s college tuition, based on recommendations from relatives and friends.At the time, the salesperson confidently claimed, “This insurance is specifically designed for children. Pay ¥10,000 annually for 10 years, and when the child turns 18, you can withdraw the principal plus interest in full…”
A decade later, Mr. Xie was delighted to retrieve the ¥100,000 he had saved. However, the insurance company informed him, “You can only withdraw slightly over ¥2,000 annually as education funds now. The principal will only be available when the insured turns 60.” ¥2,000 was insufficient to cover even a year of his child’s tuition. To make matters worse, surrendering the policy early would only return slightly over ¥60,000, resulting in a loss of ¥40,000. Mr. Xie was furious. “Had I known the funds would be locked until 60, I would never have bought this,” he said. He had wanted education-specific funds (for use after age 18), but the salesperson sold him an endowment insurance (which either pays out upon death or requires survival until 60). The needs were completely mismatched! **Tips to Avoid Pitfalls:** 1. “Verbal promises are as fleeting as the wind; only written terms are set in stone.” Never trust oral assurances from agents, even from close acquaintances. Always ensure the contract clearly states all terms in writing. Consult a professional to clarify any unclear clauses before signing. **Misleading Tactic 2: Exaggerated Returns and Confusing Concepts** 1. “Look, this policy guarantees a 2.5% return—it’s written in the contract.” Some salespeople intentionally cite a false “return” from the条款 to exaggerate benefits. For example, Xiao Lin purchased an increasing-term life insurance policy after the agent pointed to a clause claiming a 2.5% compound annual return, far higher than bank deposits. Xiao Lin assumed investing ¥1 million this year would yield ¥25,000 in interest the next, with compounding annually. In reality, the 2.5% referred to the growth rate of the base sum assured, tied to death benefits—not the actual return. The product’s real return only reached 1.64% by the 10th year. **Tips to Avoid Pitfalls:** The most scientific way to evaluate returns for increasing-term life insurance is by calculating the IRR (Internal Rate of Return) based on cash value—the “truth-teller” of insurance收益. Currently, the IRR ceiling for fixed-return increasing-term life insurance is 2.5%. Any claim exceeding this is false. 2. “This dividend-paying policy offers high returns, up to 3.5%.” This is a half-truth. Dividend policies have two return components: guaranteed returns and illustrated returns (guaranteed + dividends).Guaranteed returns are fixed and certain, while dividends depend on the insurance company’s investment performance and market conditions, making them variable.
Indeed, some products now include dividends, with projected total returns potentially reaching 3.5% over the long term. However, the key issue is that some sales agents fail to inform clients that dividends are not guaranteed, leading customers to believe the 3.5% return is certain. In reality, the actual dividends received may be higher or lower than expected. Tips to Avoid Pitfalls: Although future dividend amounts cannot be guaranteed, you can consider the following two points: 1. Historical Dividend Fulfillment Rate The dividend fulfillment rate is calculated as actual returns divided by projected returns, reflecting the insurer’s past performance in meeting dividend expectations. For example, a product with an 86% fulfillment rate in 2023 means that for every 100 yuan in projected dividends, only 86 yuan was actually paid. This rate can vary annually, so it’s best to review multiple years for a comprehensive assessment. To check the fulfillment rate, you can: – Receive the annual dividend notice from the insurer (via mail, official WeChat, app notifications, or email). – Visit the insurer’s official website and follow the steps to find the information. 2. Insurer’s Financial Strength While the fulfillment rate reflects past performance, predicting future dividends requires evaluating the company’s financial health. Key metrics include shareholder background, comprehensive investment yield, solvency adequacy ratio, and risk composite rating, all of which are available on the insurer’s website. 3. Misleading Practice: Packaging Insurance as Deposits News stories frequently report cases where individuals, especially seniors, intending to deposit money in banks end up unknowingly purchasing insurance products. A search for “savings insurance” on consumer complaint platforms reveals that 80% of cases involve “deposits turned into insurance.” The deception is simple: agents emphasize savings and returns while omitting risks and the nature of the product. For instance, Mr. Chen visits a bank to deposit money and is offered a product described as “principal-guaranteed with higher interest rates” (2.5% vs. 1.9% for a 3-year fixed deposit). Assuming the product is trustworthy, he invests 50,000 yuan, only to find later that early withdrawal yields less than 10,000 yuan in cash value. This is not entirely Mr. Chen’s fault, as insurance contracts are complex, and agents often withhold critical information about withdrawal penalties.To prevent you from realizing it’s insurance when filling out paper forms, sales agents may ask you to use mobile banking to purchase the policy and assist you with the process.
Even more alarming, some banks collaborate with insurance companies by providing depositor information to insurers. Sales agents then call customers to lure them into buying insurance at the bank. Tips to Avoid Pitfalls: 1. Saving or Buying Insurance? A Simple Way to Tell The easiest method is to observe the complexity of the process. Simply depositing money? It’s straightforward—just a deposit slip. If you’re asked to fill out extensive personal information, sign multiple forms, or review lengthy documents, be highly cautious. It’s likely insurance! 2. If You’ve Purchased an Increasing-Term Life Insurance Policy, Key Points to Withdraw Funds Increasing-term life insurance typically has a 5-6 year “lock-in period” where the cash value is lower than the premiums paid. Only after this period, when the cash value exceeds your payments, can you withdraw without loss. There are two ways to access funds from an increasing-term life insurance policy: – Partial withdrawal (reducing coverage): Withdraw part of the cash value, but most products limit this to once per year, with a maximum of 20% of the initial sum insured. – Surrender: Terminate the policy entirely to receive the full cash value, voiding the contract. 4. Misleading Tactic 4: Empty Promises, Blatant Fraud A case exposed by China Court Network involved an insurance agent selling a life insurance product to Mr. Wang. The agent claimed that paying RMB 110,000 would yield an immediate interest payment of RMB 10,000 upon signing, with the principal refunded after one year. However, the contract stated a 10-year payment term. The agent dismissed this as a “long-term product structured as short-term,” assuring Mr. Wang he only needed to pay for one year. A year later, Mr. Wang’s refund request was denied. He sued the insurer, and the court ruled the agent’s false statements constituted fraud, ordering the insurer to refund RMB 100,000. Tip to Avoid Pitfalls: Always rely on the contract terms. If unsure, verify the details through the insurer’s official channels after purchase. 5. Final Thoughts Honestly, writing about insurance pitfalls often feels conflicting. We worry that exposing these misleading sales tactics might worsen public perception of insurance, discouraging people from engaging with it altogether. However, we choose to address these issues honestly because insurance, when used correctly, serves as a safety net for many families.Many pitfalls are not inherent to the insurance products themselves but rather stem from deliberate misinformation due to information asymmetry.
Our goal is to help bridge this gap by providing clarity on the true purpose of insurance and guiding individuals toward selecting the most suitable products for their needs.
