What is savings insurance?

Savings insurance, the full name is savings dividend life insurance,Also known asSavings insurance.Participating Insurance.Savings and Dividend Insurance.

Savings Insurance EnglishNamed Whole Life.As the name suggests, it provides death compensation protection for a lifetime, becoming the first paragraphLifetime insuranceproduct.

Savings insurance can guarantee the accumulation of cash value for withdrawal and use.Policyholders of savings insurance are also eligible to earn dividends from insurance companies^*.This dividend is used to increase the death benefit and the cash value of the policy, or use the dividend to help pay the premium.This is why savings insurance (Whole Life in English) is also called "participating insurance".

How does savings insurance work?

Savings Insurance (Whole Life in English)After deducting insurance-related costs, the premium funds of the insurance company will be transferred to the insurance company for management and related investment activities.The annual dividend of the insured person is determined by the insurance company based on its own revenue and comprehensive financial situation.

To make a vivid analogy, you choose a life insurance company's savings insurance product, just like choosing a bank and setting up a "savings" account, except that the life insurance company's policy account savings function has a special name ,Call"Cash value"Part. The premium you paid, after paying the fixed insurance cost, the remaining part is automatically converted into cash value.

The dividends of your savings insurance are only related to the operating status of the family's life insurance company.Life insurance companies will pay dividends based on the company's profitability, that is, dividends.Over time, the cash value in savings insurance will increase.

The life insurance company promises a given rate of return. For example, the annual rate of return for the promised cash value is 2.0%-%3.x.The insured can use the cash value in the policy in a certain way, which is one of the benefits of this type of savings insurance.

(>>>Related reading:Can savings insurance Whole Life borrow money?)

The history of savings-based whole life insurance

From 1940 to 1970, savings-based whole life insurance was the most popular life insurance product.This type of product provides protection for the family when many families suddenly lose their loved ones, and uses a guaranteed "indemnity payment" to construct a guarantee for family income.补充.

After the passage of the Tax Equality and Fiscal Accountability Act (TEFRA) in 1981, many banks and insurance companies paid extra attention to market interest rates, and competition became fierce.Many families and individuals have begun to weigh whether to buy savings dividend insurance or to invest in the stock market (the return rate of the stock market was between 10% and 12% at the time). Most people began to invest in the stock market and term life insurance.

How much does savings insurance cost?

Savings insuranceadvantage

Generally speaking,Savings Insurance (English Whole Life)By 3 characteristics, they are:

1. Fixed premium and death benefit 

usually,Premium和Death compensationDuring the lifetime of the policy, it is fixed.Therefore, policyholders do not need to worry about insurance costs that change with age or income conditions, and your beneficiaries will also clearly know in advance, when you pass away, the amount of insured compensation that TA can get.

2. Cash value part

Savings Insurance (English Whole Life)The account can be used as a source of emergency cash in specific emergency situations.You can apply to the policyLoan cashIt comes out because as mentioned earlier, this type of insurance product is equivalent to opening a savings account for you, and a part of your premium is in this "saving account", which is called the "cash value" part of the policy.

As long as the cash value part continues to exist and grow, you can withdraw funds or borrow from this account.The point is that different companies have different policies regarding when cash value can be withdrawn and how to withdraw money.It’s important to note that different types of insurance policies,Borrowing from insurance policiesThe later cash value strategy is completely different.In the process of withdrawing cash value, there are also specific guidance plans to help policyholders avoid loss of death compensation or tax burdens.

3. Guaranteed rate of return

For the cash value part of savings-participating whole life insurance, insurance companies often provide a guarantee of the lowest yield, usually with an annual interest rate of 2.5%-4%.Subsequently, insurance companies will generally have additional dividends, but they do not guarantee whether they will receive this dividend for the year or how much.

Disadvantages of savings insurance

Everything has two sides,Savings Insurance (English Whole Life)Some of its advantages are also its disadvantages. They are:

1. The premium is relatively the most expensive

Savings Insurance (English Whole Life)Much more expensive than term life insurance.It is also the most expensive whole life insurance product.Even if the cash value accumulation function is added, due to the calculation of compound interest and the market environment, it takes a long time to accumulate cash value for savings and dividend-type whole life insurance.

2. When the market environment is good, the return on investment is relatively low

due toSavings Insurance (English Whole Life)The product must first deduct the management fee for running the insurance policy, and then the remaining money will be added to the cash value part for growth, and it is not linked to the market. Therefore, the traditional view is that when the market environment is better-as in the above-mentioned history In the 80s-the rate of return on investment was relatively low.

Savings Insurance (English Whole Life)Historical dividend trend data statistics chart, you can findAmerican Life Insurance GuideQuery and understand in the community.

3. Fees must be paid regularly, lack of flexibility

Even with the increase in cash value and the advantage of fixed premiums,Savings Insurance (English Whole Life)This type of insurance policy still requires the policyholder to guarantee regular and fixed payment.Compared with the universal insurance that will be introduced later, payment is relatively inflexible.

Savings insuranceApplicable groups

Savings Insurance (English Whole Life)Due to the length of the guarantee period and guaranteed claims, it is usually used forEstate planning, wealth inheritance and savings managementField, more suitable forNeed for lifetime protection和Unwilling to take any riskscustomer of.

Click Here ,To understanding"Recommendations on Savings Participating Life Insurance".

appendix:
01. "2018 Top 5 Savings Participating Life Insurance Companies Ranking": https://thelifetank.com/whole-life-insurance-company-top5-2018
02. "How to choose the best savings and dividend life insurance company": https://thelifetank.com/2018-top5-whole-life-insurance-caompany

Disclaimer: *The specific circumstances of Whole Life life insurance are specified by the policies and additional terms of different life insurance brands. This article does not constitute insurance or investment advice