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To understand insurance, we must start from its origins and explore how it came about and developed. Since ancient times, humanity has continuously battled the relentless forces of water and fire, as well as the unpredictable weather, adhering to the belief that "my fate is in my hands, not in the heavens." In this ongoing struggle, humans naturally developed the idea of insurance to cope with disasters, forming primitive forms of insurance. For instance, throughout history, various feudal dynasties in China placed great importance on stockpiling grain to prepare for famine. The "Book of Rites: The Royal System" suggests that if a state could save one-third of its annual grain harvest for three consecutive years, it would have enough grain to last three years, i.e., "planting three and storing one." Thus, even if a natural disaster resulted in a poor harvest one year, the common people would not go hungry. Additionally, historical records indicate that ancient Egyptian stonemasons and Roman soldiers had mutual aid societies that collected dues from members, providing funeral or compensation payments upon a member's death. These are all early forms of insurance.

Among various types of insurance, "marine insurance" is the oldest. The development of human history has always been closely tied to the sea, and it was the prosperity of maritime trade that led to the emergence of marine insurance. As early as the late 11th century, cities in central and northern Italy, such as Pisa, Florence, Genoa, and Venice, had already established forms of marine insurance similar to modern ones. When did the first truly modern insurance policy appear in human history? The first modern insurance contract was a cargo policy signed on March 24, 1384, which insured a shipment of goods transported from Arles in southern France to Pisa, Italy, known as the "Pisa Policy." Why is it considered modern? Because this policy clearly defined the insured items and liabilities, such as losses to ships and cargo due to maritime accidents, piracy, jettisoning, capture, retaliation, and raids, which align closely with the framework of modern insurance.

The Pisa Policy insured maritime cargo, and later, personal insurance emerged, insuring "people" as the insured items. Personal insurance also originated from marine insurance. In the late 15th century, European slave traders insured African slaves transported to the Americas as cargo. If a slave encountered an accident or died during transit, the insurer would provide financial compensation, marking an early form of personal insurance. The first relatively formal life insurance policy appeared in England in 1536, when a man named Martin insured a person named Jiming for £2,000, with a coverage period of 12 months and a premium of £80. If Jiming died within those 12 months, Martin would pay Jiming's family £2,000; if Jiming survived, Martin would keep the £80 premium. But why was it specifically £80 and not £100? How could one accurately "price" each individual? In 1693, the famous astronomer Halley compiled the first life table based on mortality statistics categorized by age from 1687 to 1691 in Breslau, Silesia, Germany, accurately showing the mortality rates for each age group, providing a basis for life insurance calculations. In the 1840s, mathematician James Toddson proposed the "equitable premium theory" based on Halley's life table, further promoting the development of personal insurance. In 1762, Toddson and Simpson jointly founded the world's first life insurance company—the Equitable Life Assurance Society in England. Since then, the insurance industry has rapidly developed.

By the 19th century, insurance entered a modern era, with the objects and scope of insurance expanding beyond traditional property loss and personal injury to include life insurance, liability insurance, credit insurance, and reinsurance. More and more individuals and organizations joined this industry, providing different coverage content and services for various insured items. From the origins and development of insurance, we can conclude that the birth of insurance is inevitable; as long as there is a need for protection, whether for items or people, there will be specialized institutions established to underwrite these protection needs. Essentially, ancient insurance and modern insurance do not differ significantly; the distinction lies in the fact that modern insurance has become more diverse and standardized after years of development. Today, humanity has entered the 21st century, and insurance has become one of the three pillars of finance, alongside banking and securities, becoming an indispensable part of our lives.

What is insurance? What is its purpose?#

Insurance is essentially a contract that clearly outlines the rights and obligations between us and the insurance company in black and white. Rights and obligations are reciprocal; as consumers, our obligations mainly involve how much we need to pay the insurance company each year and for how many years. Correspondingly, the insurance company's obligations include what protections it must provide and for how long. All this information regarding rights and obligations is explicitly stated in the insurance contract.

In simple terms, the role of insurance is to provide us with a sum of money to cope with risks when unexpected events, such as accidents or illnesses, occur. Based on different coverage content, we can categorize insurance into various types, such as life insurance, which is directly linked to our lives; critical illness insurance, which relates to serious diseases; and accident insurance, which pertains to accidental incidents, etc. These will be introduced one by one later.

As an important part of family financial planning, it is interesting that some so-called financial experts often separate insurance from financial management, purely believing that financial management is just about preserving and increasing asset value, unrelated to insurance. Little do they realize that this is a misunderstanding, equating investment with the entirety of financial management, while investment is merely one aspect of financial management.

The correct financial management concept, especially for family financial management, is that the first step is to set aside emergency funds for unforeseen needs, the second step is to purchase appropriate commercial insurance to build a family financial protection system, and only then can one consider investment for profit. This is akin to ensuring a solid foundation before constructing a skyscraper; otherwise, no matter how high and magnificent the building is, any disturbance could lead to a collapse, resulting in a complete loss.

Therefore, insurance can be said to be an indispensable cornerstone of our family financial management system. When you think that insurance is not an urgent matter and can be dealt with slowly, risks may have already arrived unexpectedly. When misfortune truly strikes, you may suddenly realize the importance of insurance, but it may be too late, as you may no longer meet the insurance company's underwriting requirements. Such tragedies have occurred too many times in our lives, and every time they are recounted, they evoke a sigh.

In the following chapters, I will systematically explain and clarify the insurance knowledge that is most closely related to us in the simplest and most understandable language. Please believe that after reading this book, you will have a comprehensive understanding of insurance, and in the future, you will be able to purchase insurance clearly and transparently, without being led by the nose by insurance salespeople.

As the saying goes, "A meal must be eaten one bite at a time, and a journey must be taken one step at a time." Let's first understand the functions of insurance.

The fundamental function of insurance is protection, while its upgraded function is responsibility. Let's first look at protection: what does it protect? It protects against sudden disasters that could plunge our future lives into "eighteen layers of hell." I believe everyone has heard the saying, "Happy families are all alike; unhappy families are each unhappy in their own way." Many families fall into poverty due to illness or return to poverty after falling ill. When misfortune strikes, they can only sell their cars and houses to raise funds for treatment, even dragging their family members into debt.

If early planning is done and insurance is arranged for family members in advance, these risks can be transferred to the insurance company, leading to vastly different outcomes from two different choices!

Now, let's talk about responsibility: whose responsibility? Your responsibility! To whom are you responsible? You are responsible to your family! If you have an elderly mother to support, a three-year-old child to raise, a stay-at-home wife, and a mortgage of hundreds of thousands or even millions to repay, and suddenly you pass away, how will this family, which relies on your income to live, survive? Moreover, they are the people you love most in this world.

If you find yourself in this family situation, knowing that your responsibilities are heavy but still harboring a sense of luck, failing to provide yourself with adequate protection is no different from a gambler who drives without a seatbelt, betting their life on it.

Therefore, if you do not want your happy life and that of your family to be interrupted by accidents and unforeseen illnesses, you must plan ahead, scientifically configure insurance based on actual economic conditions, and prevent problems before they arise. This is the role of insurance; it can ensure that our lives and those of our families are not disrupted or even overturned by sudden risks.

There are many classifications of insurance; here are a few common ones.#

1. Classification by the nature of insurance
   Using this method of classification, we can divide insurance into social insurance, commercial insurance, and policy insurance.

(1) Social Insurance#

This refers to mandatory insurance implemented by the state to promote certain social policies and enhance certain welfare through national legislation. For example, the well-known "five insurances" are social insurance, including pension insurance, medical insurance, work injury insurance, unemployment insurance, and maternity insurance. Due to its mandatory nature, this type of insurance currently has the highest penetration rate in China.

(2) Commercial Insurance#

Commercial insurance refers to insurance contracts signed for profit, operated by specialized insurance enterprises. The insured and the insurance company sign an insurance contract, agreeing on the rights and obligations of both parties. For example, the insured must pay premiums on time each year, while the insurance company is responsible for compensation in the event of an accident, helping the insured through difficulties. The main difference between commercial insurance and social insurance is that social insurance has a certain degree of mandatory and welfare nature, while commercial insurance is a market behavior, and the establishment of commercial insurance companies is for profit.
Of course, do not think that just because it is "profitable," commercial insurance is bad. The emergence of commercial insurance injects vitality into the insurance market. To establish a foothold in the market, insurance companies must develop products with more comprehensive coverage and lower prices based on market demand. Therefore, in terms of diversity, commercial insurance is unmatched by social insurance.

(3) Policy Insurance#

Policy insurance is a type of insurance that is less commonly encountered, referring to insurance forms promoted by the government through policies to achieve certain policy objectives using insurance mechanisms. The biggest difference between policy insurance and commercial insurance is that commercial insurance pursues profit, while government-promoted policy insurance uses insurance mechanisms to achieve certain policy objectives, such as agricultural insurance and export credit insurance.

2. Classification based on the insured object#

By distinguishing different insured objects, we can roughly divide insurance into personal insurance and property insurance.

• (1) Personal Insurance
  As the name suggests, it is insurance with a person's life and body as the insured object, including life insurance, health insurance, and accident insurance. Life insurance in personal insurance is insurance with a person's life as the insured object, including term life insurance, whole life insurance, survival insurance, and endowment insurance. Health insurance targets our personal health, commonly including critical illness insurance, medical insurance, disability income loss insurance, and nursing insurance. If the insured suffers economic losses due to health reasons, the insurance company will pay a certain amount of insurance compensation. Accident insurance refers to insurance that compensates the insured or beneficiaries for death or disability due to an accident, according to the terms of the insurance contract. To determine whether an incident qualifies as an accident, we only need to check if it meets four criteria: "sudden, external, unintended, and non-disease." For example, traffic accidents mostly qualify as accidents, while a cold does not, as it is classified as a disease.
• (2) Property Insurance
  Property insurance targets various tangible properties and related interests owned by legal persons or natural persons. It compensates for property losses due to accidents with money or physical assets. Property insurance includes property loss insurance, liability insurance, and credit guarantee insurance. In fact, the concept of property insurance can be divided into broad and narrow definitions. Broadly, property insurance includes property loss insurance, liability insurance, credit insurance, and guarantee insurance; narrowly, property insurance can simply be referred to as property loss insurance. In daily life, the property insurance we typically encounter refers to home insurance that protects household finances or home collapse damage, as well as car insurance that protects vehicles.

3. Classification based on whether it has financial management functions#

Since its inception, insurance has evolved from merely providing protection for various insured objects to also offering functions for asset preservation and appreciation. Based on whether it has financial management functions, insurance is often divided into protection-type insurance and financial management-type insurance. In simple terms, protection-type insurance only provides protection, representing the most basic and pure form of insurance. Financial management-type insurance, on the other hand, adds functions for asset preservation and appreciation on top of risk protection. Some insurance products only have financial management functions without providing any personal protection. Products like participating insurance and universal life insurance often come with some protection-type products, such as life insurance and critical illness insurance. This way, while protecting against death and critical illness risks, the premiums we pay also have a certain preservation or appreciation function. Pure financial management-type products, such as annuity insurance, education insurance, and pension insurance, can be viewed as a separate type of "financial product." As for why financial management insurance was so disliked in the past, it is actually because, despite the changes, the essence remains the same. As long as we master these three classification methods, we can quickly categorize any type of insurance product we encounter in the future and swiftly determine whether a particular insurance product is suitable for us.

Which insurances must be purchased?#

Modern insurance can be broadly classified into personal insurance and property insurance. Let's explore the types of insurance we need to configure throughout our lives, examine their protective functions, and understand their significance for our finances and lives.

1. Personal Insurance#

(1) Life Insurance
The first type I want to share is life insurance, as it holds significant meaning for a family. We will mainly explain it from three aspects: What is life insurance? How to determine the amount of life insurance? Which type of life insurance is more suitable for everyone?
Life insurance is short for life insurance, which is a type of insurance with a person's "life and death" as the insured object. In simple terms, it means that if a person passes away, compensation is paid, generally including death due to illness, accidental death, and natural death.
The reason I first explain life insurance is that it reflects family responsibilities and is particularly important for the economic pillar of the family. If the economic pillar of the family passes away unexpectedly while still needing to repay the mortgage and raise children, although a person cannot be brought back to life, the surviving spouse, children, and parents can still receive a substantial insurance compensation from the insurance company. With this money, the family can continue to pay the mortgage and cover children's education expenses, allowing the family's life to continue normally without suffering a second blow to their material life after an emotional trauma.
Thus, the practicality of life insurance is beyond doubt. Even if your current income is not high, as long as you bear these family responsibilities, you must configure it as early as possible.
So, when purchasing life insurance for ourselves, how much coverage should we choose?
Here, I will introduce the concept of "coverage amount." In simple terms, the coverage amount is the amount we can claim from the insurance company when a risk occurs. For example, if the coverage amount of life insurance is 1 million yuan, if the insured person unfortunately passes away, the beneficiary of the policy can claim 1 million yuan from the insurance company.
Generally, the coverage amount of life insurance needs to cover four gaps.
Gap 1: Family debts, including unpaid mortgages, car loans, private loans, and other personal debts.
Gap 2: Family daily living expenses, generally suggesting reserving 100 times the family's monthly expenses. If your family's monthly expenses are 4,000 yuan, then this gap is at least 400,000 yuan.
Gap 3: Future education expenses for children. The younger the child, the higher the educational expectations, and this gap will be larger. Therefore, this gap varies significantly among families, with a minimum of 200,000 yuan and a maximum of 2 million to 4 million yuan, with no upper limit.
Gap 4: Parents' support costs. Some parents live in rural areas without a fixed pension income and need to rely on their children's income for support, so this part should be carefully considered when planning life insurance. This part should also be reserved according to each family's actual needs.
The total amount of these four gaps, minus all of the family's liquid funds, is the family's life insurance coverage gap. For example, if the total amount of the four gaps is 2 million yuan and the family's bank savings and financial products total 500,000 yuan, then the family's life insurance coverage gap is 1.5 million yuan.
Once we understand how much life insurance coverage we should configure, we can look at which type of life insurance we should specifically choose.
Life insurance can generally be divided into three main categories: term life insurance, whole life insurance, and endowment insurance.
Term life insurance, as the name suggests, only covers a fixed term, for example, until age 60. If the insured passes away before age 60, the insurance company pays; if the insured passes away after age 60, no payment is made.
Whole life insurance, on the other hand, pays out regardless of how old the insured lives to at the time of death.
Endowment insurance means that if the insured unfortunately passes away during their youth, the insurance company will compensate the life insurance amount. When the insured gets older and has fewer family responsibilities, this insurance becomes a retirement savings insurance, or at a certain age, it returns the full premium as pension funds.
Which type of life insurance is more suitable for most people?
Generally, it is recommended that people choose term life insurance. Although the insurance period does not cover a lifetime, it is cost-effective, allowing you to obtain the highest coverage at the lowest cost, and the coverage period is flexible, just meeting our needs.
For the economic pillar of the family, the age range that most needs life insurance protection is 30 to 60 years old. Generally, during these 30 years, individuals will have expenses arising from responsibilities such as mortgages, car loans, marriage, children's education, and supporting parents, making this stage the most financially stressful period of life.
However, most people after age 60 will have paid off their mortgages, their children will have graduated and started working, and their own parents may have passed away. At this point, their family responsibilities will be significantly lighter, and they will only need to support themselves. Even if they unfortunately pass away at this time, it will not have a significant impact on the family's finances, making life insurance less critical.
Therefore, the key to buying life insurance is not how long the insurance period should be, but whether the period of protection is during our most critical stage. Generally, coverage until around age 60 is sufficient, and the key is to ensure that the coverage amount is adequate.
As for whole life insurance and endowment insurance, everyone will eventually die. For insurance companies, the probability of claims for these products is 100%, and the actuaries at insurance companies are not idle, so we should not think we can take advantage of the insurance company. Unless one dies early, purchasing these types of insurance will definitely result in a loss.
Life insurance is only related to life or death. As long as the insured meets the health requirements of the insurance company at the time of application, there will generally be no disputes. For this relatively simple insurance, we can directly compare prices when selecting.
To be honest, among all types of insurance, life insurance is the most suffocating. It is the only insurance that is definitely unrelated to you personally; when you win this insurance "gamble," it means you are leaving this world.
In other words, buying life insurance is not about loving yourself, but about loving others, the people you love most.
Therefore, I strongly recommend the following four groups of people to not take chances and to purchase life insurance as soon as possible if conditions allow.

• The first group is married individuals whose partners do not have a job or have a low income.

• The second group is divorced individuals who are raising children alone.

• The third group is those with high mortgages that have not been paid off.

• The fourth group is unmarried individuals without children, who do not have significant debts but whose parents live in rural areas without urban social security pensions or medical insurance.

(2) Critical Illness Insurance#

If life insurance is an important symbol of an adult's responsibility to their family, then critical illness insurance is a symbol of a person's responsibility to themselves. So, what exactly is critical illness insurance?

Critical illness insurance is a type of insurance that provides coverage for specific major illnesses. When a disease is diagnosed or reaches a certain condition, the insurance company pays a lump sum. The so-called specific major illnesses include malignant tumors, acute myocardial infarction, sequelae of stroke, etc.

For example, if someone buys critical illness insurance with a coverage amount of 500,000 yuan and is unfortunately diagnosed with cancer, they can claim 500,000 yuan from the insurance company in one go.

The biggest advantage of critical illness insurance is that the compensation can be used at the insured's discretion, whether for treatment or other expenses, such as covering family living expenses.

The compensation from critical illness insurance can mainly solve three problems:

1. Medical expenses: Medical treatment costs money, and the expenses for treating major illnesses are often unbearable for most people, making this money crucial.
2. Loss of income due to illness: Major illnesses are not like a common cold; a person diagnosed with a major illness often needs to lie in a hospital for a long time, requiring long-term sick leave and potentially facing unemployment.
3. Rehabilitation expenses: After suffering from a major illness, a person may be physically weak and require rehabilitation training and a large amount of nutritional supplements, all of which require financial support.

How much do these expenses typically cost? Honestly, there is no upper limit. Given the current price levels and medical expenses in China, at least 500,000 yuan of critical illness insurance coverage is needed; anything lower may not fully cover these risks. If conditions allow, it is advisable to configure more, as we will have to face the risks of inflation and medical inflation in the future.

Unlike life insurance, critical illness insurance comes in various forms, including cancer insurance that only covers cancer and critical illness insurance that covers 100 types of major illnesses, making it relatively complex.

The first confusion ordinary people face when selecting critical illness insurance is: how many types of illnesses should I choose to cover?

Actually, this question does not need to be overly concerned. In 2007, the China Insurance Industry Association and the Chinese Medical Association jointly formulated the "Standards for the Use of Disease Definitions in Critical Illness Insurance," which stipulates that critical illness insurance must include six mandatory major illnesses and 19 recommended major illnesses.

1. Malignant tumors—excluding some early-stage malignant tumors
2. Acute myocardial infarction
3. Sequelae of stroke—permanent functional impairment
4. Major organ transplant or hematopoietic stem cell transplant—must be allogeneic transplant surgery
5. Coronary artery bypass surgery (also known as coronary artery bypass grafting)—must be open-heart surgery
6. End-stage renal disease (also known as chronic renal failure in uremia)—must require dialysis treatment or kidney transplant surgery
7. Multiple limb loss—complete severance
8. Acute or subacute severe hepatitis
9. Benign brain tumors—must require craniotomy or radiation therapy
10. Chronic liver failure in decompensated stage—excluding those caused by alcoholism or drug abuse
11. Sequelae of encephalitis or meningitis—permanent functional impairment
12. Deep coma—excluding those caused by alcoholism or drug abuse
13. Bilateral deafness—permanent and irreversible
14. Bilateral blindness—permanent and irreversible
15. Paralysis—permanent and complete
16. Heart valve surgery—must require open-heart surgery
17. Severe Alzheimer's disease—complete loss of independent living ability
18. Severe brain injury—permanent functional impairment
19. Severe Parkinson's disease—complete loss of independent living ability
20. Severe third-degree burns—at least 20% of body surface area
21. Severe primary pulmonary hypertension—showing signs of heart failure
22. Severe motor neuron disease—complete loss of independent living ability
23. Loss of speech ability—complete loss and active treatment for at least 12 months
24. Severe aplastic anemia
25. Aortic surgery—must require open-heart or abdominal surgery

By 2021, the regulatory authorities supplemented and revised the above 25 mandatory major illnesses, updating some disease definitions and diagnostic standards, and added three major illnesses and three minor illnesses.

The three newly added major illnesses are:

1. Severe chronic respiratory failure
2. Severe Crohn's disease
3. Severe ulcerative colitis

The three newly added minor illnesses are:

1. Mild malignant tumors
2. Relatively mild acute myocardial infarction
3. Mild sequelae of stroke

Since January 2021, critical illness insurance products launched will generally include these 28 major illnesses and three minor illnesses, using the latest disease diagnosis requirements.

Therefore, as long as the critical illness insurance product was launched after January 2021, we will find that the definitions of the first 28 major illnesses and the first three minor illnesses are the same when we review the terms.

So, why are these specific diseases chosen? Because the incidence rates of these 28 major illnesses and three minor illnesses are particularly high. For example, among ten people with major illnesses, about nine will have one of these 28 major illnesses. Especially malignant tumors, or cancer, account for nearly 70% of all claims.

Thus, after understanding this, we do not need to overly focus on the number of diseases covered when choosing critical illness insurance. If you are worried about contracting a major illness outside of these 28 common major illnesses, then choosing critical illness insurance that covers more than 50 diseases is sufficient.

It is worth reminding everyone that some critical illness insurance products may claim to cover 100 or even more major illnesses, but those rare diseases have extremely low incidence rates, which provides an excuse for insurance companies to significantly increase premiums. We should not be fooled by this.

It is advisable to compare critical illness insurance products in the market, and for those covering the same number of diseases, the lower the premium, the better; for the same premium, the more diseases covered, the better. However, if a product is hundreds or even thousands of yuan more expensive than other competing products just because it covers a few dozen rare diseases, then we do not need to purchase it at all.

Additionally, critical illness insurance has evolved to not only cover serious illnesses with low cure rates but many products now allow for the option to add coverage for minor and moderate illnesses.

The classification standards for minor, moderate, and major illnesses are based on the current level of medical technology, determining whether a disease is life-threatening. If it is life-threatening, it is classified as a major illness; otherwise, it is classified as a minor or moderate illness.

The coverage amounts for minor and moderate illnesses are lower than those for major illnesses, but the insurance periods are the same.

Although the occurrence rates of minor and moderate illnesses are higher than those of major illnesses, the treatment costs and the impact on families are far less than those of major illnesses. Therefore, whether to purchase critical illness insurance with minor and moderate illness coverage does not have a standard answer. If the price of the product with minor and moderate illness coverage is acceptable, it is fine to choose it.

In addition, some critical illness insurance products also have clauses for waiving premiums for minor and moderate illnesses. This means that if a minor or moderate illness occurs, not only will the insured receive an additional compensation amount, but considering that many conditions may worsen into major illnesses, which could affect the insured's future work income, the insured will not need to pay premiums after being diagnosed with a minor or moderate illness, and the insurance contract will continue to provide coverage until the coverage period ends, such as at age 70 or for a lifetime.

This is also one of the reasons why it is advisable to choose the longest premium payment period. If the insured unfortunately contracts a minor or moderate illness during a long 30-year payment cycle, as long as the waiver clause is added, they will not need to pay premiums afterward.

The longer the payment period, the higher the probability of waiving premiums.

This is very beneficial for consumers; most conscientious products automatically include waivers for minor and moderate illnesses for the insured. Even if added separately, it will not cost much, so it is advisable to include it.

Moreover, like life insurance, critical illness insurance is also an important long-term protection type, and there is also the question of how long the coverage should last.

The probability of illness increases with age, and as income levels decrease, the need for critical illness insurance becomes more pressing. Therefore, if conditions allow, it is advisable to choose critical illness insurance that covers a lifetime; if the budget is tight, consider coverage until age 70.

When it comes to payment methods, it is best not to choose "lump-sum payment," but to extend the payment period as long as possible, just like repaying a mortgage!

Every time I mention insurance in public accounts, there are fans who leave messages asking: What insurance has the highest cost-performance ratio? What insurance is most urgently needed? What insurance is most meaningful for us?

In fact, the answer is the same. That is to use the small amount of money you can afford to guard against risks that, while not very likely to occur, are not negligible, but once they do occur, they can have particularly serious consequences.

What insurance can meet these three criteria and is the most important?

That is critical illness insurance, which fully meets these three standards.

First, the money spent on critical illness insurance is not much; second, it is not impossible to suddenly be diagnosed with cancer one day, and the older you get, the higher the probability; finally, once a major illness occurs, the entire family will fall into an irreversible tragedy.

Therefore, for individuals, critical illness insurance is the most important among all types of insurance.

(3) Hospitalization Medical Insurance#

Critical illness insurance provides a lump sum payment once the criteria for a major illness are met, which is mainly used to cover our medical expenses, loss of income, and other additional losses.

Next, let's talk about another insurance related to illness—medical insurance.

When we generally refer to medical insurance, we specifically mean hospitalization medical insurance, which is what people often hear about in recent years, such as million-dollar medical insurance. Its protection function is actually very similar to that of critical illness insurance, primarily covering the risk of illness.

One obvious advantage of medical insurance compared to critical illness insurance is that the reimbursement amount is very high; most medical insurance on the market can reimburse hundreds of thousands of yuan for hospitalization expenses, and unlike critical illness insurance, there are no disease restrictions. It covers all reasonable and necessary hospitalization medical expenses, so at first glance, it seems like a very "universal" insurance.

Moreover, for adults, the cheapest long-term critical illness insurance costs several thousand yuan a year, while medical insurance only costs a few hundred yuan a year, making medical insurance seem incredibly cheap in comparison. Therefore, many people ask whether we can replace critical illness insurance with the "higher cost-performance" medical insurance.

Hold on, let me analyze this for you.

Critical illness insurance is a payment-type insurance, meaning that the contract stipulates how much will be paid out. Most of these are advance payment types; for example, if Xiao Ming buys critical illness insurance with a coverage amount of 500,000 yuan, as long as the hospital issues a report confirming that Xiao Ming indeed has stomach cancer, the insurance company will immediately transfer 500,000 yuan to Xiao Ming's bank account.

This means we have the right to choose; for example, knowing that this illness is difficult to cure, we might still want to use this 500,000 yuan to fight for a chance. Or if we know that the illness is indeed hard to treat but do not want to give up, we can first use this money for treatment, and when the condition worsens and we do not want to waste more money, we can leave the remaining 200,000 or 300,000 yuan for our family for future living.

However, the claims process for medical insurance is different; it is a reimbursement-type insurance.

For those with tight finances, this means you must first gather a large amount of medical expenses, and only after treatment can you take the receipts to the insurance company for reimbursement.

Additionally, medical insurance has three issues that cannot be ignored.

First, million-dollar medical insurance generally has a deductible; for example, if the deductible is 10,000 yuan, this means that if the medical expenses after social security reimbursement are less than 10,000 yuan, there will be no compensation. Ordinary outpatient visits and minor ailments will not be reimbursed.

Second, although the premium for medical insurance is currently much lower than that of critical illness insurance, its premium increases with age. The older you get, the higher the premium; by the time you reach your 60s, you may have to pay several thousand or even over ten thousand yuan a year, and the total accumulated premium will far exceed that of critical illness insurance.

Finally, the renewal of medical insurance is subject to the uncertain future of medical inflation. Currently, there are no ordinary million-dollar medical insurance products that guarantee long-term renewal; most are one-year contracts, and the best case is 20 years of coverage. If the product is discontinued in the future, renewal will not be possible. This can lead to a fatal issue: if you are in your 40s and have many minor health issues, and your long-term medical insurance suddenly stops, it will be difficult to switch to another medical insurance at that time.

Thus, medical insurance cannot replace critical illness insurance.

However, conversely, medical insurance, while having many restrictions, also has obvious advantages compared to critical illness insurance, namely that it is relatively cheap in the short term.

Additionally, medical insurance pays out as long as you are hospitalized for treatment. But going to the hospital is not always due to illness; it could also be due to an accident, such as being hit by a car or assaulted, which requires hospitalization and incurs certain costs. Medical insurance can also cover these expenses.

In other words, medical insurance also includes medical expenses due to accidents, effectively serving part of the role of accident insurance, thus broadening its coverage. Therefore, critical illness insurance cannot completely replace medical insurance.

Since they each have their own characteristics and cannot replace each other, when should we buy critical illness insurance, and when should we buy medical insurance?

It is simple: it depends on how much money we have.

For those with limited income, it is advisable to buy the few hundred yuan medical insurance to save money, but be aware of its limitations and ensure that you will add critical illness insurance as soon as conditions allow.

For those with a certain economic foundation, it is best to configure both critical illness insurance and medical insurance to cover both major and minor illnesses, ensuring comprehensive protection.

In modern parlance, medical insurance and critical illness insurance are a pair of ace partners that should not be separated; both should be configured for more secure protection!

(4) Accident Insurance
Previously, we discussed life insurance, critical illness insurance, and medical insurance in personal insurance; now let's talk about the last type of personal insurance—accident insurance.

There is an old saying: "It is not the ten thousand that is feared, but the one in ten thousand." This "one in ten thousand" refers to accidents.

Everyone has the potential to experience accidents. Unlike life insurance and critical illness insurance, the price of consumer accident insurance is very cheap; a premium of a few hundred yuan a year can provide coverage of hundreds of thousands, offering high leverage and suitability for all ages.

I recommend that young people who have just entered society, after purchasing basic social insurance, consider configuring accident insurance for themselves.

Next, let's discuss the concept of accident insurance, how to determine the coverage amount, and how to select accident insurance from three aspects, showing how to achieve great results with small expenditures.

Accident insurance, formally known as accident injury insurance, refers to personal insurance that pays out based on accidental death or disability.

Accidental injuries are classified into three categories based on severity: accidental death, accidental disability, and accidental medical expenses.#

Accidental death directly pays the coverage amount specified in the contract; accidental disability pays based on the level of disability assessment; accidental medical expenses are the most common, simply referring to injuries caused by accidents that require hospitalization, regardless of severity, which can all be considered accidental medical expenses and can be reimbursed with hospital receipts.

In essence, accident insurance provides compensation for death due to accidents, disability due to accidents, and reimbursement for medical expenses due to accidents. Some accident insurance even provides hospitalization allowances.

So, how do we determine the coverage amount for accident insurance?

I suggest calculating the coverage amount based on 5 to 10 times your annual income. Consumer accident insurance is highly cost-effective; a comprehensive accident insurance policy with a coverage amount of 500,000 yuan costs less than 200 yuan a year, making it affordable even for families with tight budgets.

Additionally, I recommend choosing consumer accident insurance, which can be purchased annually. Avoid those policies that require a 10-year payment for 30 years and then return the principal; we should steer clear of those traps.

In summary, purchasing accident insurance is relatively straightforward. Once you confirm that the basic information is correct and meets your needs, simply choose the cheapest option under the same coverage conditions.

Specifically, when selecting accident insurance, pay attention to the following key points:

1. The conditions for accidental death and disability should be broad enough.

   • Some products only cover traffic accidents, meaning you can only claim if the accident occurs while using a mode of transportation, while others cover all accidental injuries regardless of where they occur. Therefore, be sure to choose products with broader coverage.

2. Be cautious of the fine print in accidental medical insurance.

   • When selecting accidental medical insurance, in addition to the reimbursement limit and deductible, pay attention to the reimbursement ratio. It is best to choose accident medical insurance with a reimbursement ratio of 95% to 100% and to check whether the reimbursement includes medications not covered by social security, as this is even better.

3. Consider your occupation and whether it meets the underwriting requirements for accident insurance.

   • Accident insurance only covers accidents, so generally, there are no health requirements. Even if you have a serious illness, many products can still be directly insured. However, many people overlook that accident insurance has restrictions based on the insured's occupation; the higher the occupational risk level, the harder it is to purchase.

The reason is simple: the probability of an office worker experiencing an accident is much lower than that of a "spider man" cleaning the exterior walls of a building using ropes.

Therefore, it is generally easy for individuals engaged in Class 1 to 3 occupations to purchase accident insurance, while those in Class 4 to 6 occupations must be more selective.

To determine which class an occupation belongs to, refer to the insurance company's "occupational classification table," as standards vary among companies.

Remember to ensure that your occupation meets the coverage requirements for accident insurance before applying to avoid unnecessary disputes later.

In summary, the coverage content of these four types of personal insurance is as follows:

• Life insurance pays out upon death, regardless of whether it is due to an accident, illness, or natural causes.
• Critical illness insurance pays a lump sum if the insured meets the specified criteria, which can be due to a major illness or disability resulting from an accident.
• Medical insurance reimburses for hospitalization expenses that meet the criteria, with no specific disease restrictions; whether it is appendicitis or cancer, as long as the expenses meet the requirements, reimbursement can be applied for.
• Accident insurance is the simplest; it only considers whether the incident was caused by an accident, covering accidental death, disability, and medical expense reimbursement.

Overall, as long as a person configures these four major types of insurance, they will be able to cope with over 90% of the diseases and accident risks encountered in life.

2. Property Insurance
   Modern insurance can be broadly classified into personal insurance and property insurance. We have covered the main types of personal insurance; now let's discuss property insurance, particularly home insurance and car insurance, which are most relevant to the average person.

(1) Home Insurance
Home insurance, formally known as household property insurance, is a type of insurance that targets tangible property. In simple terms, it is an accident insurance for your house and tangible property inside it.

Many people overlook home insurance, thinking it is useless. In fact, home insurance, which costs only a little over a hundred yuan, has a very high cost-performance ratio, and it is advisable to configure it as early as possible.

Whether you own a primary residence or a rental property, it is advisable to purchase home insurance. Especially for rental properties, tenants may not take care of the house as you do, leading to various issues, such as improper electrical wiring, which could cause a fire, resulting in significant losses.

How should we choose home insurance?
There are three suggestions:

1. The coverage range of home insurance is not the same, and the premiums also vary. Generally, the broader the coverage, the higher the premium. However, this does not mean that home insurance with a larger coverage is necessarily better. It is advisable to carefully review the coverage range and exclusions of each home insurance policy and choose the one with the highest cost-performance ratio that meets your actual situation.

2. Insurance companies generally do not cover valuables such as gold and silver jewelry or antique collections, which are difficult to assess for actual value. If you need special coverage for these items, you will need to purchase specialized property insurance.

3. Generally, most home insurance policies will exclude coverage for "earthquakes" and "tsunamis." Therefore, if you live in an area with a high risk of earthquakes or tsunamis, it is advisable not to purchase this type of home insurance.

In simple terms, home insurance is a type of accident insurance that protects household property. Choose based on what you want to protect; the price is not too expensive, and the annual premium for protecting a house worth millions is only a few hundred yuan.

(2) Car Insurance
After discussing home insurance, let's talk about car insurance. Friends who own cars should pay attention when purchasing car insurance, as there have been many pitfalls in the past, but it has become simpler since the reforms in 2020.

Car insurance, formally known as motor vehicle insurance, is a special type of insurance that can be further subdivided into many types, including compulsory insurance, vehicle damage insurance, third-party liability insurance, no deductible insurance, driver liability insurance, passenger liability insurance, glass insurance, theft insurance, water damage insurance, spontaneous combustion insurance, scratch insurance, etc.

Among them, compulsory insurance is mandatory; if you do not pay it, it is illegal. If the police find your car without compulsory insurance on the road, they can impound the vehicle on the spot.

Vehicle damage insurance is also basic coverage; it is important to note that the coverage amount for vehicle damage insurance is the actual value of your car, which depreciates every year. Therefore, the maximum coverage amount for vehicle damage insurance will decrease each year, and the corresponding premium will also slightly decrease.

Third-party liability insurance is what you need to pay to the person you hit if your car collides with someone. According to Chinese law, as long as you hit someone while driving, regardless of whether it is the other party's fault, you must pay some compensation.

In summary, compulsory insurance is the standard configuration for car insurance and is indispensable. Additionally, the most important commercial car insurance packages are vehicle damage insurance and third-party liability insurance.

Now, where can we buy car insurance more cost-effectively?
In addition to traditional insurance companies, we can also purchase car insurance from some legally authorized third-party platforms, such as Alipay and WeChat.

Both Alipay and WeChat have mini-programs for selling car insurance, although the entry points are hidden quite deep, so you need to look for them. The car insurance sold on these two platforms is generally very cheap and comes from well-known insurance companies that have been selected. These large companies, due to their abundant resources, not only provide relatively fast loss assessment and rescue services after major accidents but also offer various value-added services.

The development of the internet has injected new vitality into the insurance industry and brought new opportunities for its development. Ultimately, the beneficiaries are still the ordinary people.

How to scientifically configure an insurance plan?#

Scientifically configuring an insurance plan involves reasonably arranging different types of insurance based on individual or family financial conditions, life needs, and future planning to achieve effective risk dispersion and maximize protection. Here are the steps and principles for scientifically configuring an insurance plan:

1. Assess your risk status and needs#

First, determine what types of insurance you need based on your risk status. Different groups, life stages, and occupations face different risks, and insurance configurations need to vary accordingly. The main categories of needs include:

• Personal protection: For example, health risks, accident risks, life expectancy risks, etc.
• Property protection: For example, risks of loss of property such as houses and cars.
• Income protection: For example, income interruption due to unemployment, disability, or inability to work.

2. Understand the types of insurance#

Common types of insurance include:

• Life insurance: Primarily used to protect the economic stability of the family after the death of the economic supporter. Includes term life insurance, whole life insurance, etc.
• Health insurance: Covers medical expenses due to illness or medical accidents, including hospitalization, outpatient, critical illness, etc.
• Accident insurance: Protects against injuries or deaths caused by accidents, usually with a broad coverage range.
• Critical illness insurance: Covers the costs of diagnosing specific major illnesses, usually providing a lump sum upon diagnosis.
• Property insurance: Such as car insurance, home insurance, household property insurance, etc., protecting physical assets.
• Income protection insurance: Provides income protection for a certain period if unable to work due to illness or accident.

3. Configure based on protection priority#

Arrange insurance based on the priority of risks. Generally, the following types are the most critical:

1. Health insurance: Health is the most basic protection, as the risk of illness is faced by everyone. Choose appropriate medical insurance and critical illness insurance based on your health status and financial capacity.
2. Life insurance: If the family economy relies on your income or if there are significant debts (like a mortgage), consider purchasing term life insurance or whole life insurance.
3. Accident insurance: If your work or life involves higher accident risks, consider increasing accident insurance coverage.
4. Income protection insurance: If you are the main economic source of the family and do not have sufficient financial reserves to cope with unemployment or long-term illness, consider configuring an income protection insurance.

4. Ensure the insurance coverage and amount are reasonable#

• Coverage range: Choose the insurance coverage based on your life needs. For example, health insurance should cover common and acute diseases, and critical illness insurance should include high-incidence major diseases.
• Coverage amount setting: The coverage amount should be set based on the family's financial situation. Generally, living expenses, children's education expenses, mortgage, and debts should be important factors in calculating the coverage amount.

5. Diversify risks and avoid over-insurance#

Avoid over-insurance, which means unnecessary multiple or duplicate insurance for a single item. Scientific configuration should minimize overlapping coverage and reasonably disperse risks across different types of insurance. For example, in health insurance, there should be basic medical coverage, and additional hospitalization allowances and critical illness insurance can be purchased to form a layered protection structure.

6. Rationally utilize the time and duration of insurance#

• Combine short-term and long-term: Term life insurance and accident insurance can be chosen as short-term insurance options to ensure family finances are not affected by accidents in the short term; while health insurance, whole life insurance, etc., can be chosen as long-term insurance to protect against future risks.
• Gradual adjustment: As family structure and financial conditions change, regularly evaluate and adjust the insurance plan. For example, as children grow up and mortgages are paid off, certain insurance amounts or terms may be reduced.

7. Consider the cost-effectiveness of insurance products#

When selecting insurance products, pay attention to their cost-effectiveness rather than simply pursuing high coverage or big brands. Compare different companies' insurance products, choosing the one with the most suitable coverage content and the most moderate cost. Also, note that the terms and claims service of insurance products are important; try to choose companies with good reputations and simple claims processes.

8. Regularly evaluate and adjust#

As time goes by and life circumstances change, insurance needs will also change. For example, the birth of a child, aging parents, and career changes will all affect insurance needs. Evaluate your insurance plan regularly (such as annually or every two years) and adjust according to needs.

9. Avoid over-reliance on a single insurance#

Try to avoid relying on a single insurance product to cover all risks. Different insurance products focus on different protections, so it is best to use a combination. For example, critical illness insurance and health insurance complement each other, while whole life insurance and term life insurance each serve different purposes.

10. Consider tax benefits#

Certain types of insurance may enjoy tax benefits. For example, some enterprise annuities and health insurance can be deducted from taxable income. Therefore, when configuring insurance, tax planning can also be combined to optimize the plan.

Example: Family insurance configuration plan#

Assuming the family consists of: a couple and a 6-year-old child. The parents are 35 and 34 years old, with a combined annual income of 400,000 yuan.

1. Life insurance:

   • Both spouses should purchase term life insurance, with a recommended coverage amount of 10 times the family's annual income, i.e., 400,000 yuan × 10 = 4 million yuan. This way, in the event of an unfortunate incident, it can ensure the family's basic living needs.
   • Whole life insurance: One spouse may consider purchasing a certain amount of whole life insurance as a wealth transfer tool.

2. Health insurance:

   • Purchase commercial medical insurance for both spouses and the child, suggesting coverage for hospitalization, outpatient, emergency, etc.
   • Critical illness insurance: Purchase critical illness insurance for both spouses, with coverage amounts of 500,000 to 1 million yuan, covering most common major diseases.

3. Accident insurance:

   • Both spouses can purchase comprehensive accident insurance with coverage amounts of 200,000 to 500,000 yuan each.

4. Children's insurance:

   • Purchase a children's insurance plan for the child, covering accidents, health, education protection, etc., to ensure that the child is protected against various risks during growth.

5. Property insurance:

   • Insure the family's main property (such as house and car) with corresponding property insurance to avoid property loss due to unforeseen accidents.

Scientific configuration of an insurance plan is not just a simple stacking of insurance products; it is more important to plan reasonably based on individual and family actual needs. Regularly evaluating and adjusting the configuration can ensure that it can cope with unexpected risks while considering economic affordability, which is the scientific way to configure insurance.

How to spend the least amount of money to solve protection issues for elderly family members#

Caring for elderly family members requires careful attention and patience, as well as reasonable financial planning. If you want to solve protection issues for the elderly with minimal expenditure, you can start from the following aspects:

1. Utilize government and social security policies#

• Social pension insurance: Ensure that the elderly have participated in basic urban and rural resident pension insurance. For eligible elderly individuals, monthly pensions can be received, which is a basic protection measure.
• Low-income and poverty subsidies: If the elderly have low income, they can apply for low-income or related subsidy policies from the community, as many places have dedicated support measures.
• Medical insurance: Ensure that the elderly have participated in medical insurance (urban and rural resident medical insurance or employee medical insurance). In many places, there are additional medical insurance discount policies for the elderly, which can reduce the burden of medical expenses.

2. Family care and home care#

• Family care: If conditions allow, consider having family members care for the elderly to avoid sending them to nursing homes, which can save costs. However, ensure that family members have enough time and energy to provide care.
• Home care services: If you do not want the elderly to live in a nursing home, consider hiring home care staff. Home care is usually cheaper than hospitalization and can provide personalized care, especially for basic care services (such as medication administration, bathing, companionship, etc.).

3. Smart devices#

• Smart health devices: There are many smart devices on the market, such as wearable health monitoring devices and emergency call devices for the elderly. These devices can provide timely assistance in emergencies, serving as a form of "virtual care."
• Automated home devices: Devices like automatic fall alarms and smart home systems can enhance the safety of the elderly at home, reducing potential accident risks.

4. Choose appropriate insurance#

• Health insurance and insurance for the elderly: Purchasing basic health insurance or insurance specifically for the elderly can provide financial support in case of unexpected health issues. Choose basic insurance products to avoid overly complex and high-cost high-end insurance, ensuring that premiums do not become too high.
  • Consider accident insurance to help reduce costs associated with accidents.
  • Long-term care insurance: Suitable for those who may need long-term care, this type of insurance will provide financial support in case of long-term care needs.

5. Choosing nursing homes and day care centers#

If the elderly need to enter a nursing home, choosing economical nursing homes or day care centers is also an option. Some areas have public nursing homes that charge relatively low fees, but be sure to choose institutions with good reputations and basic service guarantees.

• Day care services: If the elderly can take care of themselves, consider day care services where they can be cared for during the day and return home at night. This way, they can maintain social interactions and care needs while saving on hospitalization costs.

6. Rational division of responsibilities among family members#

• Shared responsibilities among relatives: If conditions allow, family members can take turns caring for the elderly to reduce the long-term care financial burden. In multi-generational families, family members can arrange their time to alleviate care pressure.
• Volunteer services and community support: Many communities or elderly service organizations provide free volunteer services or low-cost assistance programs. Pay attention to local community services to see if there are suitable programs to reduce the care costs for the elderly.

7. Avoid excessive spending#

• When providing protection for the elderly, maintaining a rational consumption attitude is crucial. Choose cost-effective medical services, insurance products, and long-term care services to avoid excessive spending. Ensure that the effectiveness and economy of protection are balanced, and do not blindly pursue high-end, complex services.

8. Understand and utilize community resources#

Many cities and communities offer various services and support for the elderly, including elderly activity centers, health lectures, free health check-ups, psychological counseling, etc. Understanding and utilizing these resources can help improve the quality of life for the elderly while reducing additional expenses.

9. Plan according to your financial capacity#

In providing protection for the elderly, it is essential to maintain a rational consumption attitude. Choose cost-effective medical services, insurance products, and long-term care services to avoid excessive spending. Ensure that the effectiveness and economy of protection are balanced, and do not blindly pursue high-end, complex services.

10. Consider the financial situation of the family#

When planning for the elderly, consider the overall financial situation of the family. Ensure that the chosen protection measures are within the family's financial capacity to avoid excessive financial burden.

In caring for the elderly, the most important thing is reasonable planning, combining personal and family actual situations, and choosing suitable protection methods. By utilizing government policies, family resources, social services, technological products, and reasonable health management, it is possible to ensure the quality and safety of life for the elderly at a lower cost.

When purchasing commercial insurance for parents, prioritize accident insurance, followed by medical insurance, and consider critical illness insurance only if the financial capacity is sufficient.

Why prioritize accident insurance?
Because elderly individuals often have mobility issues and may be more prone to accidents than younger people, and the premiums for accident insurance are usually very low, even for the elderly, so it should be prioritized.

Additionally, since the premiums for critical illness insurance are directly linked to age, the older one gets, the more expensive it becomes. After age 50, the probability of critical illness increases, and premiums can rise exponentially. By age 65, even if you are willing to pay a high price, insurance companies may be reluctant to sell you critical illness insurance.

At this point, medical insurance is more suitable for the elderly. There are still options available in the market for a few hundred to a couple of thousand yuan, and medical insurance does not have specific disease restrictions; as long as the expenses meet the criteria, it is very practical.

Finally, if your parents are already retired or still working but no longer serve as the family's economic pillar, purchasing life insurance for them is not very meaningful. Life insurance should protect the economic pillar of the family.

After understanding the three considerations for purchasing insurance for parents, we will move on to the practical aspect of configuring insurance for them.

The first step is to confirm whether your parents have medical insurance.
For the elderly, medical insurance is undoubtedly a very good protection measure. The essence of medical insurance is to use the contributions of young and healthy individuals to subsidize the elderly and children, especially prioritizing high-age elderly individuals. It not only has a low threshold but also covers a large amount of medical expenses, making it highly cost-effective. Therefore, compared to commercial insurance, ensuring that parents have basic medical insurance or social security is the most important thing.

The second step is to arrange appropriate accident insurance for parents.
When selecting products, focus on the reimbursement conditions for accidental medical insurance. It is best to choose zero deductible and ideally one that does not limit social security medications, as these types of medical insurance have lower reimbursement thresholds and are more practical.

The third step is to configure appropriate million-dollar medical insurance for parents, and consider critical illness insurance only if conditions allow.
Because the premiums for critical illness insurance vary significantly around age 50, after age 50, premiums tend to increase exponentially, so it is very passive to think about buying critical illness insurance only after turning 50. If your parents are not yet 50, it is advisable to "get on board" as soon as possible; if they are already over 50, it is generally not recommended for ordinary families to configure critical illness insurance for parents.

In summary, I recommend prioritizing medical insurance for parents as a social welfare measure, followed by commercial accident insurance and medical insurance. Critical illness insurance varies by individual and should not be forced.

The key insurance concept I want to convey in this section is that when purchasing insurance for parents, never wait; the older they get, the more passive it becomes.

Regarding how to configure insurance for the family economic pillar, stay-at-home spouses, children, and parents, we have reached the end of this discussion.

Finally, let's summarize this section briefly.
First, the family economic pillar should ideally have all four major types of insurance: life insurance, critical illness insurance, medical insurance, and accident insurance.
Second, for stay-at-home spouses and children, the most important thing is to prevent disease and accident risks, and generally, life insurance is not needed. For them, critical illness insurance, medical insurance, and accident insurance are the best combinations.
Third, for elderly parents, there is no need to configure life insurance, and the cost-effectiveness of critical illness insurance is not very high. After having medical insurance, generally, it is sufficient to configure accident insurance and medical insurance.

Why are financial management-type insurances so disliked?#

Financial management-type insurance is often disliked for several reasons:

1. Complex fee structure#

Financial management-type insurance typically has a complex fee structure, including high policy management fees, profit-sharing for insurance companies, and high initial fee deductions. This makes it difficult for policyholders to intuitively understand how much of the premium they pay is for protection and how much is for investment.

2. High hidden costs#

Many financial management-type insurances often yield lower returns than other investment channels, especially compared to direct investments in stocks, bonds, and other market products. Even if financial management-type insurance offers "dividends" or "investment accounts," these returns are often significantly diminished by hidden management fees, operational costs, and policy fees, resulting in net returns far below expectations.

3. Misleading advertising#

Some insurance companies or agents may overly emphasize the "financial management" function when selling financial management-type insurance, neglecting or downplaying its "insurance" function. For instance, they may promote it as a guaranteed investment product, giving consumers a misleading impression that purchasing insurance will yield high returns. This lack of transparency in sales often leads to consumer dissatisfaction and disappointment.

4. Poor liquidity#

Financial management-type insurance generally has long payment terms and holding periods. If policyholders want to cancel or change their policies midway, they may face significant losses, including surrender losses and actual returns far below expectations. In contrast, other investment products tend to have higher liquidity, allowing investors to meet their needs more flexibly.

5. Low investment returns#

Although financial management-type insurance has an investment component, many products' investment returns are far lower than traditional investment channels (such as the stock market or funds). Additionally, because insurance companies typically choose conservative investment strategies, their investment portfolios may not have high return potential. Consumers sometimes feel that purchasing financial management-type insurance is not cost-effective.

6. Not suitable for everyone#

Financial management-type insurance is actually more suitable for consumers who need long-term protection and have financial management needs. However, for those who only seek short-term investment returns or purely need insurance protection, financial management-type insurance is often not the best choice. Many people find that these products do not yield significant financial appreciation, instead occupying their funds and energy.

7. Agent commission issues#

Insurance agents typically earn a commission based on the policies they sell, so they may recommend high-commission financial management-type insurance products that are not ideal for consumers' needs. This self-interest in sales creates a sense of distrust among consumers, further deepening their aversion to financial management-type insurance.

8. Complicated cancellation and renewal processes#

If consumers want to cancel or adjust their insurance products, the process is often complicated and may involve significant financial losses. Insurance companies typically have cumbersome procedures for cancellations or changes, leading consumers to feel "trapped."

The design of financial management-type insurance is originally intended to meet both insurance and investment needs, but its complex fee structure, low returns, and hidden costs often lead to negative experiences. Furthermore, excessive promotion and misleading sales tactics exacerbate consumer dissatisfaction. Consumers often find it challenging to fully understand the product details when selecting financial management-type insurance, resulting in confusion and disappointment after purchase. Therefore, financial management-type insurance is viewed by some as an "enticing yet disliked" financial product.

Should I get a health check before applying for insurance?#

Let’s clarify what health disclosure is.
Insurance companies are profit-driven commercial entities. To avoid paying out more than they collect in premiums, they set health disclosure as a requirement for underwriting.
In simple terms, health disclosure is the health questionnaire from the insurance company that all applicants must answer truthfully; otherwise, the insurance company has the right to refuse claims in the future.
For example, if the health disclosure asks, "Do you have malignant tumors?" then a person with cancer cannot apply for insurance. Conversely, if there were no such restrictions, all cancer patients could apply for insurance and then claim benefits, which would lead to the insurance company going bankrupt.

Not all insurance requires health disclosure, though.
Health disclosure generally appears in health-related insurance, such as life insurance, critical illness insurance, and medical insurance, which are hurdles we must pass when applying for coverage, similar to passing the written test when obtaining a driver's license.
Different companies have different health disclosure requirements; for instance, some may ask if we have thyroid nodules, while others may not ask at all, each with its own focus.

So, how do we pass health disclosure?
Domestic health insurance's health disclosure generally adopts a "limited disclosure" approach, emphasizing the word "limited."
According to Article 16 of the Insurance Law of the People's Republic of China (2015 Revision), when entering into an insurance contract, the insurer must inquire about the relevant circumstances of the insured object or the insured person, and the applicant must disclose truthfully.
In layman's terms, answer truthfully to what is asked; if it is not asked, there is no need to disclose!
For example, if the health disclosure only asks whether we have high blood pressure, if we do, we should disclose it truthfully; if we do not, there is no need to disclose it proactively, even if we have other issues like diabetes or fatty liver.

Some may wonder, what if I have never had a health check and am unsure about the questions on the health disclosure? Do I really not need to get a health check before applying for insurance?
I can assure you: No, you do not!
Take the common example of thyroid nodules.
Before a health check, we may have thyroid nodules due to irregular sleep or stress, but if they are asymptomatic and no doctor has diagnosed them, we can confidently choose "none of the above" when applying for insurance.
Since we have not been diagnosed with this issue in a medical institution and have no relevant medical records, the insurance company cannot prove that we had thyroid nodules before applying for insurance, and this will not hinder our claims for health insurance later.

Conversely, if we had a thyroid nodule diagnosed at a hospital or health check facility, and it was recorded, then sorry, we would have a "record."
Even if this issue is minor and the doctor says it does not affect health, if the health disclosure asks about it, we cannot treat ourselves as healthy and apply for insurance; we need to submit the relevant examination results or medical records for the insurance company's underwriting personnel to review, and the insurance company will decide whether we are still eligible for insurance.

Thus, the difference between having a "record" and not having one is significant when applying for insurance.
Without a "record," we can choose products; with a "record," the products choose us...

After understanding this, I believe everyone will understand why I strongly oppose getting a health check before applying for insurance.
A person may have some minor health issues but is unaware of them; when applying for insurance, they can apply as a healthy individual, and the insurance company will not cause any trouble during claims.
However, if they undergo a comprehensive health check and all minor issues are discovered, they will face a long underwriting process. If any item is deemed high risk by the insurance company, they will be denied coverage.

From the insurance company's perspective, it would be best if all applicants underwent health checks before applying for insurance, as this would maximize the exclusion of those with minor health issues and thus minimize the claim ratio.
But this would be a huge loss for us consumers or applicants.

So remember this: if there are no special requirements, avoid health checks before applying for insurance to prevent losing eligibility due to discovering minor issues!

How to fill out the health disclosure questionnaire wisely?
Earlier, we discussed that before purchasing health insurance, it is best not to undergo a health check, as health insurance has health disclosure restrictions. If a health check reveals some minor issues, it may lead to a loss of eligibility for insurance products.

Therefore, to successfully configure your desired insurance product, you need to have a "clean record" and carefully fill out the health disclosure.
Let's look at how to fill out the health disclosure intelligently.
Health disclosure is essentially a health questionnaire listing various diseases that may restrict coverage.
Healthy individuals can pass through smoothly, but many people have minor health issues, such as thyroid nodules, breast nodules, or breast hyperplasia, which may prevent them from passing the health disclosure. What should they do?
In simple terms, we should utilize the previously mentioned "limited disclosure" principle: answer truthfully to what is asked, and do not disclose what is not asked.

To illustrate, if you have hemorrhoids but the health disclosure does not ask about it, you can apply for insurance directly without any issues.
However, if you have hepatitis B, and the health disclosure includes "hepatitis virus carrier" as a restriction, you cannot apply for insurance directly; otherwise, you may face disputes over claims later.

In summary, successfully passing health disclosure is a skill that requires patience and attention to detail. Carefully review each question to see if there are any historical records related to the symptoms and time limits mentioned in the health disclosure. For example, if the insurance company asks, "Have you had ×× disease in the past two years?" and you had it five years ago and have fully recovered, that is not a problem.

At this point, I will share two tips for passing health disclosure:

1. Use the examination records from formal hospitals or health check institutions as the standard; self-diagnosed diseases at home do not count. Therefore, before buying insurance, do not easily undergo health checks. Wait until after purchasing insurance and the waiting period has passed, then go see a doctor or get a health check. At that time, even if minor issues are discovered, the insurance company cannot refuse coverage or claims.
2. Different insurance companies have different health requirements for their products, some being lenient and others strict, with varying focuses. If you have minor health issues, it is advisable to check several products to see if you can find one that meets your requirements.

Generally, using these two tips, as long as your health is not significantly compromised, you should be able to find a suitable product.

If you use these two tips and still cannot pass, for example, if you have thyroid nodules, which many people in China have, and almost every health-related insurance product will ask about this, does that mean people with thyroid nodules cannot obtain health insurance?
Not at all; it is far from hopeless. We can still try "smart underwriting."
Smart underwriting sounds advanced, but it is essentially a "yes or no" question process. When we have minor health issues related to the symptoms mentioned in the health disclosure, we can use the smart underwriting system to provide specific information to the insurance company, which will determine whether we can be insured.

The smart underwriting process is simple: select the corresponding health issue to be underwritten, then answer truthfully based on your actual situation, and you will receive an underwriting conclusion on the spot.
In addition to normal underwriting, the underwriting conclusion generally has three outcomes:

• Denial: This means the insurance company believes your condition is too serious to be insured.
• Exclusion: This means that under certain specific circumstances, the insurance company will not provide coverage. For example, if thyroid nodules are excluded, then if you develop a thyroid-related disease in the future, the insurance company will not pay, but for other diseases, they will still pay.
• Increased premium: The insurance company believes that this condition will increase the likelihood of claims, so they will require a slight increase in premium to agree to coverage.

Denial is not something we can choose, but for the latter two situations, if we find the conditions acceptable, we can proceed with the insurance; if we find the underwriting conditions too harsh and are not satisfied, we can choose to forgo it.

In fact, undergoing a smart underwriting questionnaire has no impact on us other than consuming some mobile data. It will not affect our credit report or have any negative consequences for future insurance purchases or other matters, even if we are denied coverage through smart underwriting.

Similarly, in terms of smart underwriting, different insurance companies have different health requirements, some being lenient and others strict. Some companies may be strict about Disease A but relatively lenient about Disease B, while others may be the opposite. Therefore, do not get hung up on one tree; if you are denied coverage the first time, try several different insurance companies' products, and you may find one that meets your requirements.

Now, if you still cannot find a way to resolve the issue and cannot purchase any insurance, you will have to reveal your last card—manual underwriting.
Manual underwriting differs from smart underwriting in that it is reviewed by professional underwriters, unlike smart underwriting, where the questions and standards are preset and relatively rigid.
Therefore, manual underwriting is more targeted and flexible in handling underwriting issues.
If you are purchasing insurance offline, simply submit the relevant underwriting materials to the salesperson, such as relevant medical records, examination reports, etc. The materials will be passed through layers of review until they reach the underwriter.
Most online products also support manual underwriting. Generally, you can take photos of the relevant materials and upload them to the insurance company's system or send them via email to the designated address.

I advise everyone that whether you go through offline or online underwriting, do not get hung up on one tree; it is best to cast a wide net and see which insurance company is willing to underwrite.
If two or more insurance companies are willing to underwrite, compare which company's underwriting conditions are better and which product has a higher cost-performance ratio, and choose that one.

However, note that manual underwriting requires submitting personal identification information, so when submitting underwriting materials, you must fill in your name and ID number. Therefore, carefully consider before choosing manual underwriting, as it will leave a "record."

If you are unfortunately denied coverage, you will need to undergo underwriting for any other products you wish to purchase in the future. Thus, it is crucial to think carefully before opting for manual underwriting.

Currently, with so many products on the market and intense competition, as long as you have not developed a serious illness, you can always find a suitable insurance product. If you can successfully pass health disclosure, do not undergo underwriting. If you must undergo underwriting, choose smart underwriting over manual underwriting; otherwise, being denied coverage could lead to trouble later.

As Zhang Ailing said, "Fame should be sought early," and buying insurance is similar; it must be done early because the younger and healthier you are, the cheaper the premiums will be, and you are less likely to be denied coverage.

If you are already in your 30s or 40s and have minor health issues, do not lose heart; cast a wide net and try multiple options, and you will eventually find a suitable product.

It seems simple and easy to implement, right?

Hold on, think carefully, and you will find it is a bit complex...

First, income is not the only measure of a family's financial situation; a single person with an annual income of 300,000 yuan and a family with two children have very different financial burdens.

Moreover, many insurance policies require payments over several decades. This year's income does not represent future income. Many friends around me bought numerous policies when their income expectations were high, but now that their income has decreased, the premiums have become a heavy burden.

Using these standards to set a premium range for yourself is acceptable, but trying to derive an exact value from it is somewhat impractical.

Previously, the website of the China Banking and Insurance Regulatory Commission provided a suggestion for the proportion of income allocated to insurance premiums, which can be used as a reference; a range of 5% to 15% is relatively broad, and everyone can adjust it flexibly based on their situation.

In fact, online insurance products now have a high cost-performance ratio. Based on the needs of different family members, configuring basic protection-type products is not a significant burden for most families.

So, let's think from another angle: why do some friends still have such high premiums?

They worry that if they buy insurance, they won't use it, or that they will lose money, so they choose products with "returns."
They do not consider their own needs and blindly buy high-priced offshore insurance.
They think they are buying medical insurance but discover years later that it is high-end medical insurance.
As new parents, they buy excessive and high coverage for their children.
They purchased long-term, high-premium savings-type products when their income expectations were high.

From these cases, it can be seen that most people end up paying high premiums for insurance because they "do not understand." It is not that the products mentioned are bad; every product has its applicable conditions and scenarios. The key is to