[Savings Insurance] Understand bonus types to avoid budget overruns when withdrawing money early

To achieve “financial freedom”, passive income is indispensable. Some insurers have seized on this and promote certain savings insurance products as offering attractive returns, while also allowing flexible cash withdrawals to create your own cash flow — “earning money while taking money out”. But is the reality really that ideal? How stable are the returns? This time, 10Life has compared the returns of five popular savings insurance products on the market, with examples to help explain them, so that everyone can better understand how they work.

Many people, after working for a period of time, gaining recognition in their careers and accumulating a certain level of assets, begin planning for the second half of life. They hope to use financial planning tools to grow their assets steadily, and savings insurance is one of the options. Savings insurance can increase passive income. If you want to withdraw an annual “pocket money” amount as a travel fund, while also building retirement reserves, which popular product can satisfy both wishes at once?

The table below shows that, assuming the policyholder is 45 years old, pays US$100,000 over a short premium term, and begins withdrawing US$5,000 each year from the 3rd year (or the nearest year) onwards, then surrenders the policy at the specified time. How much cash has the policyholder withdrawn from the policy, and how much cash value can be received upon surrender?

Under the same circumstances, the cumulative cash withdrawals of the above products are similar; the main difference lies in the guaranteed and non-guaranteed cash value on surrender. Taking BOC Life’s 月悅出息終身享保險計劃 and CTF Life’s “匠心 • 傳承” Savings Life Insurance Plan 2 (Prestige Edition) as examples, assuming the insured surrenders the policy in the 20th year, the insured would have accumulated withdrawals of around US$85,000 from the policy by then (equivalent to HK$663,000). Even excluding non-guaranteed bonuses, the guaranteed cash value of the BOC Life policy would still be US$100,909, enough to break even. As for the CTF Life policy, although the guaranteed cash value in the 20th year is only US$51,300, when non-guaranteed bonuses are included, the total projected cash value reaches US$142,178, the highest among the five products.

Although the above products can also be used to “withdraw cash” during the policy term, the sources of the cash are not the same. Taking BOC Life’s Monthly Yield Lifetime Protection Insurance Plan as an example, the cash withdrawn by the insured person comes from monthly bonuses. Monthly bonuses are a type of Cash Dividend, meaning they are declared and paid monthly. Annual withdrawals will not affect the policy’s guaranteed cash value, so cash dividends are a relatively liquid type of bonus. Of course, customers may also choose not to withdraw the money and leave the bonus in the policy, allowing it to accumulate over time and earn non-guaranteed interest. However, it should be noted that cash dividends are non-guaranteed and are affected by the insurer’s operating and investment performance.

By contrast, the bonus structure of the other four products consists of Reversionary Bonus and/or Terminal Bonus. The insured person should note that if the amount of the relevant bonus is insufficient to cover the withdrawal amount, a partial surrender may be required so that the remaining amount can be withdrawn from the guaranteed cash value. This will reduce the overall value of the policy, and the accumulated amount will also shrink. In addition, keen observers may notice that the annual policy statement lists the terminal bonus, but the terminal bonus announced each year is determined by multiple factors, including the insurer’s investment performance and operating expenses, and may rise or fall.

As for Reversionary Bonus, it is also a type of non-guaranteed return. Its Face Value does not change after being declared, and it is permanently added to the Sum Assured, payable upon the insured person’s death. However, the Cash Value of the Reversionary Bonus is also non-guaranteed, and in the event of surrender, the insurer may pay it at a discounted value. 

If you want to create your own cash flow with a savings insurance policy, the life assured needs to wait for a period of time, allowing the capital to accumulate interest before withdrawals can begin. However, not all savings insurance policies are suitable for early withdrawal; conversely, some savings insurance policies are better suited to long-term holding, where interest is compounded over time and, eventually, deliver more substantial returns.

If you would like to learn more about savings insurance plans, please feel free to contact 10Life’s insurance consultants to find the savings insurance product that suits you best.

Further reading:
Difficult to pin down the “expected returns” of participating policies? 10Life’s exclusive analysis of 2023 dividend fulfilment ratios
How should you choose a participating policy? Three key indicators to check before taking out cover (with a comparison of multi-currency savings insurance from multinational companies)

Last updated: 11 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.