Author
Bowtie Team
Updated on
2025-07-10
Disclaimer: This article is translated with the assistance of AI.
Ignore your finances, and they’ll ignore you! While this saying might be cliché, it holds truth. From stocks and funds to forex, savings insurance, and crypto, wealth tools are endless. Bowtie brings in veteran insurance expert Bro Bao to break down whether savings insurance can truly be your financial ally.
Before we dive into whether insurance can be a financial tool, let’s first unpack the basics of financial planning. When choosing a financial tool, we typically consider three key factors: time, risk, and return.
The ideal scenario? A perfect blend of “short time, low risk, high return.” But let’s be real—such a magical combo rarely exists. If it does, it’s probably a scam!
3 Key Aspects of Financial Tools
Time
This refers to the duration of investment or the liquidity of funds. For instance, investing in stocks offers short timeframes and high liquidity, making it a highly flexible financial tool.
On the other hand, traditional savings insurance falls on the low-flexibility end. The money tied up in savings insurance usually can’t be withdrawn at will, and interrupting premium payments could trigger a surrender, potentially wiping out your principal.
Risk
Investments always come with risks. High-risk options may promise high returns but can also lead to significant losses. Conversely, low-risk investments offer stable but often smaller returns.
Savings insurance tends to carry lower risk. In Hong Kong, insurance companies are tightly regulated, so safety isn’t a major concern. However, watch out for issues like dividend realization rates often falling short, and expected returns varying widely under different risk scenarios.
Return
Different financial tools offer varying rates of return. Investors need to pick products that match their risk tolerance. Potential returns often correlate directly with risk—the higher the risk, the greater the potential reward, but also the bigger the chance of loss.
Savings insurance, meanwhile, offers lower returns with relatively smaller risks.
Issues with Savings Insurance as a Financial Tool
First off, savings insurance often delivers low returns since insurance companies deduct various fees, like management costs and commissions. Secondly, it lacks liquidity—surrendering early could mean losing part of your principal. Lastly, savings insurance offers limited investment options, making it tough to adjust your portfolio based on market shifts.
What is Buy Term and Invest the Rest?
“Buy Term and Invest the Rest” is a financial strategy that suggests opting for term life insurance (like Bowtie Term Life) over savings insurance, then investing the saved premiums elsewhere. The idea is simple: term life insurance comes with lower premiums for the same coverage, leaving you extra cash to invest in stocks, bonds, or other high-return tools for better wealth growth.
What’s the Ideal Financial Strategy?
The ideal financial plan should be tailored to your personal goals and risk tolerance. This means diversifying investments, choosing the right tools for your needs, and regularly reviewing and tweaking your portfolio. Traditional options like stocks and bonds offer higher returns and flexibility. On the flip side, insurance should primarily serve as risk protection, not your main wealth-building strategy.
Conclusion
While savings insurance is often pitched as a financial tool, its low returns and poor liquidity make it less than ideal for primary wealth-building. In contrast, the “Buy Term and Invest the Rest” strategy offers a smarter way to balance asset growth and risk management. At the core of financial planning are time, risk, and return—choose tools that suit you, and regularly review your strategy to hit those financial goals.
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