The main purpose of financial insurance is to preserve the value of wealth, so it is more as a kind of investment with relatively certain income.In my opinion, financial insurance is actually a kind of "displeasing" product on both sides, generally speaking, financial insurance is to lock in the future for a long period of time (a few years, even decades) yield, generally about 2%-5%.
In the era of China's rapid economic development and GDP growth rate of 8%, consumers felt that the general yield of 3% or 4% could not beat the inflation and wanted to invest the money in products with higher yields.On the contrary, the insurance company is more concerned about the long-term nature of the agreement, because it is difficult for the insurance company to guarantee that it can achieve such a high rate of return on investment in the following decades, and the economic development and social situation in the next decades are unknown.In essence, we cast the insurance, which is to let the insurance company with our premium to invest in what to buy stocks, bonds, funds, and then put the part of the money (because also deducted company operating costs and certain profits), according to the provisions of the contract and return it to us.
So since the purpose of financial insurance is investment, the rate of return is the most critical indicator.Just like taking a loan from a bank, if we consumers are treated as banks, then buying financial insurance is equivalent to lending money to an insurance company and agreeing to repay us on a monthly or annual basis after a certain time in the future. Our rate of return is the "lending rate" of the insurance company. The financial insurance variety available in the market, many of them are make money a few years ago, to a few years later, again a year take money, considering the future money worthless (i.e., inflation), the contrast of simple input and benefits of the two Numbers, affirmation is not scientific. IRR is the rate of return calculated comprehensively after taking into account the time cost of capital. For example, one insurance policy says that after 30 years of retirement, you can receive 3,000 yuan a year as a pension; So I think, what's the purchasing power of $3,000 in 30 years?
After considering the time cost of capital, the internal rate of return calculated can be compared horizontally among different WMPS. For example, if the IRR of insurance A is 3.0 and the IRR of insurance B is 3.2, then the yield of insurance B is higher. Of course, in addition to the rate of return, whether it can meet our real needs, such as children's education funds, their own pension, is also an important factor to measure the suitability of an insurance.
