&#34;Stock trading is exhausting? This type of 'easy profit' insurance is the wealth haven for ordinary people!&#34;
Recently, an internet insurance platform showcased a product called &#34;increasing premium life insurance,&#34; and such a statement appeared prominently on the page.
Is this statement appropriate?
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The so-called increasing premium life insurance, fully known as &#34;increasing premium whole life insurance,&#34; is a life insurance product designed to have a &#34;basic insurance amount&#34; that grows over time.
However, in the current sales context, these products are intentionally compared to financial products and labeled with terms like &#34;easy profit&#34; and &#34;safe haven&#34; to highlight their &#34;stable&#34; (actually the insurance amount) returns and growth.
Moreover, some internet platforms have targeted younger clients with smaller amounts of personal funds, introducing a purchasing method similar to &#34;regular investment in funds&#34;—requiring only a small monthly investment to participate in so-called insurance wealth management, making it seem as easy as buying a fund.
Even more eye-catching is the repeated emphasis in the promotion on &#34;guaranteed returns,&#34; &#34;high yield,&#34; &#34;flexible withdrawals,&#34; &#34;capital protection,&#34; and even the ability to take out loans at any time. This all-encompassing packaging has transformed what was originally a professional and somewhat complex life insurance product into a seemingly safe and uncomplicated financial product in the eyes of consumers, akin to &#34;liquid wealth management.&#34;
But is it really that simple?
<h2>Cashing out in the first four years may lead to significant losses</h2>
It must be said that some promotional pages for increasing premium life insurance products are quite enticing: &#34;Returns consistently rank in the top tier of the market,&#34; &#34;Wealth grows steadily,&#34; &#34;Insurable up to age 70,&#34; &#34;Strong liquidity, flexible withdrawals when cash is needed.&#34; (As shown below)
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However, if we look at the cash value table in the contract (which can be understood as a &#34;price list&#34; for how much can be retrieved upon cancellation), many &#34;hidden details&#34; that are not touched upon in the promotional language begin to emerge.
According to the case presented in the materials (shown below), if an investor cancels and withdraws cash within the first four years after purchasing the policy, the cash amounts retrievable are only 1847 yuan, 4771 yuan, 12895 yuan, and 28360 yuan respectively (assuming the investor has paid the annual premium of 10,000 yuan).
These figures represent a very high percentage of &#34;loss&#34; compared to the total premiums paid that year, especially in the first and second years, where the loss rate is almost over 75%.
In other words, cashing out in the first four years almost guarantees a &#34;significant loss.&#34;
Only by the end of the fifth year can one &#34;break even,&#34; but the returns are not ideal. According to the specific case presented in the relevant materials:
<blockquote>
End of Year 5: Cumulative payment of 50,000 yuan, cash value of 50,532 yuan, just barely exceeding the principal
End of Year 6: Cash value is 51,517 yuan, resulting in an annualized return of only about 0.5%, which is worse than many demand deposit financial products.
End of Year 10: Cash value is 55,645 yuan, with a total increase of only 5,645 yuan over ten years, translating to an annualized return of about 1.08%.
</blockquote>
In other words, if customers choose to surrender the policy in the early years due to urgent cash needs, they are almost certain to incur losses; even if they hold on until Year 6 or Year 10, the return experience remains very average, far below the common financial products available in the market.
The so-called &#34;strong liquidity of funds&#34; merely indicates that the contract allows you to surrender the policy at any time, but surrendering early equates to losing money, a point that is consciously &#34;overlooked.&#34;
These phrases are linked to the promotional wording of &#34;stable wealth growth&#34; presented at the same time, easily leading insurance buyers to associate it with &#34;capital preservation.&#34;
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<h2>In urgent need of cash? The &#34;cost&#34; of &#34;withdrawal&#34; is not low</h2>
On the relevant promotional page, there is also a clause that is very straightforward: &#34;The product is flexible and has liquidity.&#34; (As shown in the image below)
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It is accompanied by two highlights:
First, &#34;Supports reducing coverage: You can cumulatively apply to reduce the basic insurance amount by 20% each policy year.&#34;
It sounds like you can withdraw money at any time, but in reality, the money withdrawn comes from your cash value, which is often lower than the premiums you paid in the early years.
The final conclusion is that while you can &#34;withdraw,&#34; doing so &#34;early&#34; means &#34;losing.&#34;
Second, &#34;Supports policy loans: You can borrow up to 80% of the cash value without credit checks or bank statements, and the funds can be received within 1-3 days.&#34;
This sounds even more convenient, but don't forget this is a loan, not free money. You have to pay interest, and it may affect the policy's effectiveness. In other words, it means using your own policy as collateral to borrow money and leverage.
Therefore, this so-called &#34;flexibility&#34; comes at a cost: either the principal shrinks, or you incur interest. For ordinary investors, this kind of &#34;flexibility&#34; is completely different from the experience of bank deposits that can be accessed and used at any time.
<h2>The &#34;compound interest temptation&#34; of 2% per year</h2>
On the sales page of this increasing amount life insurance product, there is also a Q&amp;A section, with the first question addressing the product's advantages.
The text states: &#34;The effective insurance amount increases at a rate of 2.0% per year compounded&#34; (as shown in the image below), and this text is also included in the product contract.
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Upon seeing &#34;2%/year compounded,&#34; it indeed seems very tempting, especially in an era of significantly declining savings rates
But the &#34;key&#34; lies in the &#34;details.&#34;
The 2% mentioned here refers to the effective insurance coverage rather than the cash itself. &#34;Effective insurance coverage&#34; usually refers to the amount of insurance money that the insurance company actually pays out when an insured event occurs. For example, if the initial coverage is 100,000 yuan, it may change to 102,000 yuan in the second year.
More importantly, we must return to the previously mentioned concept that in increasing coverage life insurance products, coverage and cash value are two entirely different concepts. The amount of cash value that can be withdrawn in a timely manner also depends on the contract terms.
For investors concerned about &#34;how much can be refunded upon cancellation,&#34; the first thing to do is to pay attention to the insurance contract terms. Secondly, they should also pay more attention to the cash value clauses in the contract; the coverage mainly corresponds to the compensation amount in the event of death or total disability, and the two should not be confused.
Additionally, the change in cash value is not fixed at 2%, but is determined by the insurance company's actuarial calculations, expenses, and investment situation, often being lower than the premiums paid in the first few years.
So remember: 2% is just the growth of the coverage, not a fixed interest on the principal, and certainly not your annualized return.
<h2>Why Increasing Coverage Life Insurance is Booming</h2>
Different eras will have different types of insurance products that become the focus of financial consumers' purchases. In recent years, the hot insurance products certainly include &#34;increasing coverage life insurance.&#34;
A review of the data reveals that as early as 2014, the first increasing coverage life insurance product appeared in the Chinese life insurance market, but at that time, such products had not yet become mainstream.
According to a brokerage research report: the first wave of popularity for increasing coverage life insurance occurred alongside the &#34;new asset management regulations&#34; reshaping the financial management environment.
As regulatory authorities gradually adjusted the assessment interest rates for certain insurance products, the popularity of increasing coverage life insurance began to rise from 2019. Among the 76 life insurance companies that released financial reports in 2020, about 30 companies had increasing coverage whole life insurance among the top five insurance products by original premium income.
With bank savings and wealth management interest rates entering a &#34;rapid downward channel&#34; in recent years, increasing coverage life insurance products with stable growth in coverage have become increasingly popular.
According to the &#34;2021 Development Report on Bank Agency Channel Business&#34; released by the China Insurance Industry Association, &#34;In 2021, the high flexibility of funds and diverse functions of increasing coverage whole life insurance products allowed them to stand out in competition, occupying an absolute mainstream position in the bank insurance market.&#34;
In the past two to three years, increasing coverage life insurance has further gained popularity.
By 2022, as market interest rates continued to decline, sales of increasing coverage life insurance experienced another wave of peak (as shown in the figure below).
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The promotional language of various distribution platforms and insurance companies began to focus on the selling point of &#34;high interest rate locking,&#34; with common expressions including &#34;compound interest of 3.5% for wealth management insurance,&#34; &#34;locking in a long-term interest rate of 3.5%,&#34; and &#34;the returns of increasing coverage whole life insurance are written into the contract, ensuring rigid payment,&#34; portraying increasing coverage life insurance as a stable and certain financial management alternative that seems to counteract declining interest rates
Since the beginning of 2025, the guaranteed interest rate of life insurance products (i.e., the minimum interest rate promised to customers by insurance companies during pricing) has been lowered three times in a row, making it easier for increasing death benefit policies to be promoted as a &#34;rare product that locks in high interest rates.&#34;
For a wide range of insurance investors, life insurance products serve as both a form of protection and a wealth management tool, which naturally holds significant meaning.
However, in the sales process, why not be more practical and sincere, allowing investors to understand the products more accurately, thereby enabling this &#34;business&#34; to gain long-term recognition from the investing public at a deeper level

Is this a perfect bestseller or a sales pitch?

When "increasing premium life insurance" transforms into "current financial management"