What are the options for using insurance to save? Compare savings insurance, tax-deductible annuities, investment-linked insurance and universal life insurance, analysing returns and risks.

There is a wide range of insurance products designed for saving money. Common examples include savings insurance (which can be further divided into short-term and whole-of-life plans), tax-deductible annuities (officially known as “Qualifying Deferred Annuity Policies”, QDAP), investment-linked assurance schemes (commonly referred to as “ILAS”), and universal life insurance. However, many consumers find these insurance products confusing, or take out policies because of their high returns, only to lose money when surrendering them early. What are the differences between these products? What must you know before taking out a policy? In the following article, 10Life will examine the characteristics of these products one by one, including their returns, uses and potential risks.

Whole-of-life savings insurance can be used for long-term savings, helping you prepare for retirement, your children’s education and achieving your dreams (such as starting a business or travelling around the world). The product offers guaranteed and projected returns, and the policy term can extend to the policyholder’s entire lifetime. Policyholders must select a premium payment term (ranging from 1 to 25 years) and pay fixed premiums during this period. You should understand your target term and the IRR (internal rate of return) when the policy reaches that target term. For example, if Mr Chan plans to fund his child’s overseas education in 20 years, he can compare the 20-year IRR of different whole-of-life savings insurance products. As whole-of-life savings insurance requires time to build up value, policyholders may incur a loss if they surrender the policy in its early years.

It is worth noting that savings insurance products in the market have different positioning, with varying returns and risks:

• Conservative: focuses on guaranteed returns
• Growth: strikes a relatively balanced approach between guaranteed and projected returns
• Aggressive: emphasises projected returns

If you would like to compare whole-of-life savings insurance products, visit the 10Life website’s <《Product Decoder》>:

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Universal life insurance has a relatively high entry threshold, and policyholders are generally required to pay a large premium in a lump sum, so it is aimed at wealthier individuals. Some products offer a minimum guaranteed payout rate for a specified period. Policyholders can use premium financing to borrow at a low interest rate (lower than the guaranteed payout rate of universal life insurance) to pay the large premium. As long as borrowing costs remain low, policyholders can profit from the interest-rate spread. However, if borrowing rates rise and the insurer's payout rate fails to keep pace, losses may result.

An investment-linked assurance scheme (known as an investment-linked assurance scheme or ILAS) allows policyholders to make “fund investments” through insurance. ILAS is a long-term investment. Returns are linked to the performance of the selected funds and are not guaranteed, while the life cover is at least 105% of the account value. Insurance companies typically offer a range of funds for policyholders to choose from. These funds cover different regions (such as developed countries and emerging markets), countries (such as the US and China), or industries (such as finance and technology), enabling policyholders to invest in markets and industries outside Hong Kong through ILAS.

Charges should be taken into consideration when investing in funds. In addition to the charges imposed by the funds themselves, insurance companies also levy fees, known as additional charges. You may compare the fees charged by ILAS, banks and online fund trading platforms. ILAS generally does not charge switching fees, which benefits policyholders who frequently buy and sell funds.

Returns from ILAS are linked to the performance of the selected funds. During a rising market, returns can be substantial; however, investment losses may result in a loss of principal. Even if a fund has delivered impressive returns in the past, this does not mean it will perform well in the future. It is also worth noting that, unless insurance intermediaries hold a licence from the Securities and Futures Commission (SFC), they are not legally permitted to provide advice on fund selection. Policyholders therefore need to have a certain level of investment knowledge.

Further reading:

【Savings Insurance】Understand the types of bonuses to avoid miscalculating your finances when withdrawing money mid-term
【Financial Planning Methods 2025】What constitutes an ideal investment portfolio?

The above products also provide life cover, but the amount of compensation varies depending on the product and is therefore not discussed in detail here. This article provides a brief comparison of the various insurance products that can be used for savings. Put simply, returns are proportional to risk. When you hope to achieve higher returns, you should also understand your ability to bear risk. When someone promotes a product offering high returns with low risk, you should be particularly cautious and understand the product concerned. You are welcome to compare insurance plans through 10Life《Insurance Decoder》. 

Last updated: 20 August 2025

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.