When it comes to insurance, most people have an intuitive impression that they don't need it, and they often hear statements like these:

Eight out of ten insurance sellers are frauds;

Insurance is a pastime for wealthy housewives with nothing to do, using their connections to kill time;

I'm very young and in good health, I won't get seriously ill;

I'm so frugal I can't even afford to take a taxi, I'll buy insurance when I have more money later;

Insurance only covers low-probability events, I won't be that unlucky;

If a person is gone, what's the use of buying insurance?

Since I'm going to buy it, I might as well get one with higher returns;

I'll buy more for my children, I don't need it for myself...Due to the relatively late start of the insurance industry in our country, the quality of insurance practitioners varies, leading to certain misconceptions about insurance among many people. After truly understanding the significance of insurance, we can categorize it into the following types:

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1. The first category is protective insurance, primarily used to safeguard our basic personal and property safety. This category includes medical insurance, critical illness insurance, accidental insurance, life insurance, auto insurance, and home property insurance, among others.

Accidental insurance, as the name suggests, covers accidents, sudden, external, and unintentional events that cause personal injury, which fall under the definition of an accident in insurance terms. Therefore, events that seem to occur unexpectedly, such as heatstroke, sudden death, and high-altitude sickness, are essentially caused by individual health issues and do not meet the definition of an accident.

The main coverage of accidental insurance includes: accidental death, accidental disability, accidental medical expenses, and accidental allowances.

Accidental death: For example, if someone has purchased accidental insurance and dies in a car accident, the insurance payout is the insured amount.

Accidental disability: For instance, if someone becomes blind in both eyes, the payout is based on the standard for personal disability grading.

Accidental medical expenses: Medical costs resulting from an accident can be compensated for, such as in the case of an accidental fall.

Accidental allowance: For example, if someone is hospitalized for a month due to an accident, they receive a daily allowance of 200 yuan.

Medical insurance and critical illness insurance both provide compensation for illnesses. Literally, medical insurance should pay out as long as the insured is hospitalized due to illness. However, critical illness insurance pays out for specified major diseases, which generally refer to severe conditions like cancer.The main differences between critical illness insurance and medical insurance are as follows:

Firstly, the scope of coverage varies. Medical insurance covers all diseases, while critical illness insurance covers major illnesses with high incidence rates and significant treatment costs.

It should be noted, however, that the term "critical illness" in this context is different from the medical definition. In medical terms, a critical illness refers to a severe condition that has not seen a breakthrough in medical treatment.

Secondly, the method of payment differs.

This is a significant distinction between reimbursement-type medical insurance and critical illness insurance. Medical insurance only covers the treatment costs, so it is a reimbursement-based compensation. You need to pay upfront, and the insurance company will reimburse you based on the invoices.

Critical illness insurance, on the other hand, is different because it focuses more on the overall impact of major illnesses on your life. Therefore, it uses a lump-sum payment method, which is unrelated to the cost of treatment. As long as the conditions are met, the money is paid out in one go. You can use this money for treatment, of course, but also for buying nutritional supplements or even to subsidize household expenses.

Lastly, the duration of coverage is different.

Medical insurance is generally for one year, but critical illness insurance is mostly long-term, divided into regular critical illness and lifetime critical illness. Lifetime coverage means protection for a lifetime, while regular coverage usually lasts until you are in your sixties or seventies. This allows you to obtain higher coverage with relatively lower costs during the period when your family responsibilities are the heaviest.

So you see, the scope and significance of critical illness insurance are very clear; it is designed to protect you from the impact of major illnesses on your normal work income and to ensure that your family's finances do not collapse as a result.

What is life insurance?For life insurance, most people's first reaction is, what's the point of getting a lot of money when the person is gone?

Of course, nothing can replace the importance of life to a family, but I want to remind you that while the person is gone, the responsibilities remain.

Suppose someone dies due to an accident or illness, but the mortgage and car loans do not die with them. Life insurance is designed to ensure that after the insured person's death, they can still fulfill their responsibilities to their family. It is for this reason that life insurance coverage periods are relatively long, and like critical illness insurance, it is also divided into term life insurance and whole life insurance.

Term life insurance usually covers a period of 20 to 30 years, with relatively low premiums, mainly to help us get through the two or three decades of our lives where we have heavier responsibilities, preventing the family from losing their financial support due to an early death. Whole life insurance covers for life, no matter when the person dies, their family will receive a lump sum compensation, which is also generally used for wealth preservation and inheritance.

Car insurance and home insurance are relatively simple; they are types of insurance purchased to guard against specific risks, such as car accidents, injuries, etc., or accidental losses to the house and household property, with the insurance company providing compensation.

The second category, investment-type insurance, utilizes the unique long-term asset characteristics of insurance to help us achieve a higher quality of life. It primarily ensures our responsibilities to our family and our own future retirement life. This category of insurance tools mainly includes annuities, dividend insurance, universal life insurance, investment-linked insurance, and so on.

In theory, annuities, dividend insurance, universal life insurance, and investment-linked insurance can all be considered investment-type insurance.

What is annuity insurance? The characteristic of annuity insurance is that the policyholder can set the payment conditions and methods themselves. You can have the insured receive a sum of money each year, or at a specified time, such as at the age of 18, receive a lump sum. Dividend insurance and investment-linked insurance are also modifications of the profit methods based on annuity insurance.

So, how should you choose investment-type insurance? You should base your choice on your goals and its profit method.The commonality of financial insurance is forced savings and locked-in returns.

Financial insurance is somewhat akin to a fixed investment, where you periodically hand over a sum of money to an insurance company, which then manages it. Upon maturity, according to the contract agreement, the insurance company will either return the money to you periodically or in a lump sum.

Why use insurance as a method for forced savings?

Let me illustrate with the example of retirement, which is an important phase we all have to face. In China, retirement is primarily supported by social security and savings, but as you may know, relying solely on these two sources is far from sufficient.

So where should the remaining funds come from?

If it's savings or other financial instruments, money might be diverted for unexpected situations, and the income and expenditure levels throughout one's life often move in tandem. When income is high, so are expenditures; when income is low, expenditures decrease as well, making it difficult to ensure that there is extra money for retirement savings. Moreover, even if you have ample savings, they are a cash pool that diminishes with use. What if you run out of money and live a particularly long life?

What are the benefits of insurance? Through forced savings, when your income is substantial, you deposit a fixed amount annually. When you need retirement funds, the insurance company begins to return the money, providing a cash flow that lasts as long as your life cycle. The advantage of cash flow is that as long as you live, the insurance company will continue to provide it.

Additionally, insurance is relatively safe. Most financial insurance products have a guaranteed minimum return standard, which is specified in the contract, ensuring that we do not lose our principal.

You might ask, can't bank deposits and government bonds also lock in returns? What's the difference between them and insurance?

Bank deposits lock in short-term returns, typically maturing within a few months to a maximum of three years; government bonds, due to their safety, offer low returns, making it difficult to outpace inflation. Insurance, however, is different. It locks in long-term returns, often spanning 10, 20 years, or even a lifetime, allowing it to outperform inflation over a longer time horizon. Such long-term assets are rare.These financial products do not have a hierarchy of superiority or inferiority; their commonality lies in enforced savings and locked-in returns. The difference lies in the way the returns are generated. Once you understand where their differences lie, you can choose based on your insurance objectives.

The third category is transfer-oriented. These types of insurance generally serve two purposes: one is to protect against the risk of one's own survival, and the other is to help us smoothly transfer wealth to the next generation, providing them with basic life security. For example, by purchasing a whole life insurance policy for yourself or an annuity insurance policy for your child, you can achieve this function.

Wealth transfer mainly includes two aspects: inter vivos transfer and posthumous transfer.

Inter vivos transfer refers to providing a sum of property to our family while we are still alive, such as children's educational expenses, dowry, or betrothal gifts. To meet this need, we can typically use annuity insurance.

Annuity insurance is different from life insurance. Life insurance pays out upon death, but annuity insurance has two payout conditions: survival benefits and death benefits. Typically, the beneficiary of the survival benefit is the insured person themselves, and as long as they are alive, the insurance company pays them a certain amount according to the policy term, ensuring their livelihood until they pass away or the contract expires. However, death benefits are paid out upon death, with the beneficiary being the insured person's immediate family, and after the insured person's death, the insurance company pays the beneficiary a death benefit.

Posthumous transfer, after discussing inter vivos transfer, let's look at posthumous transfer, which mainly aims to avoid potential property disputes and inheritance tax issues during the inheritance process. The product we usually use for this purpose is whole life insurance.

In fact, all life insurance policies that have death as a liability have the function of wealth transfer. Here, I mainly introduce whole life insurance because it has two advantages: first, it has a high leverage, allowing you to obtain a higher coverage with a relatively small premium, and second, whole life insurance is only paid out after death, which is akin to a dedicated fund for the family. It is lifelong coverage, and regardless of the cause or timing of death, the beneficiary will definitely receive the claim payment.

Different periods and stages require different configurations of insurance.If you have just graduated from university, with no savings and no family, all you need is to ensure your personal safety. Therefore, you only need to arrange for medical insurance and accident insurance within the protection-type insurance.

A few years later, if you have started a family, saved money, and bought a house and a car, at this point, you need to start taking on responsibilities. To ensure the safety of your family and property, and to avoid the family collapsing completely due to a certain risk, you can add critical illness insurance, life insurance, home property insurance, and car insurance to the protection-type insurance.

Later on, if you have achieved some success and have a relatively substantial income, and you want to plan for your own retirement and your children's future, you are in the middle layer of the risk pyramid, facing expenditure risks. You can add and adjust based on your financial situation, on top of the protection-type insurance.

For example, if you want to have a decent retirement life in the future, you can add investment-type insurance to have a long-term asset that can provide a cash flow that lasts as long as your life.

Finally, if you also want to leave a fortune for your children, you need to pay attention to the ownership of property rights and the risk of wealth transfer. At this time, you can also add whole life insurance and annuity insurance from the transfer-type insurance.

After arranging these, your defensive system is also established. When we really face risks, we will not be completely without a response plan, leading to a sudden collapse of life.

A few points to note in the end:

When buying insurance, if you have a medical history or have had surgery, the insurance company will underwrite according to your physical condition if you inform them. If it is normal, it will be normally insured, and if there is a problem, you need to have a medical examination, refuse insurance, add a fee, or exclude responsibility. If the policyholder or the insured deliberately conceals and does not truthfully inform, the insurance company may refuse to compensate if they find out the deliberate concealment in the future. Therefore, you must tell your insurance broker about your health condition before buying insurance.

Insurance is not something that can be achieved overnight, and it needs to be adjusted according to the stages of life. When the responsibility is relatively small and the economic foundation is weak, you can choose products with high leverage and a focus on protection.

Finally, I would like to remind you that buying insurance is not a trivial matter, and you cannot follow the crowd and completely listen to the advice of others or insurance consultants. You need to make a rational analysis based on your own risk situation and make an insurance purchase. At the same time, before purchasing insurance, you must read the relevant contract terms carefully to ensure your maximum benefits.