The Illusion of Returns: How Some Insurance Policies Can Mislead Investors

03 Mar 2025

Insurance. It's supposed to be a safety net, a shield against life's uncertainties. But sometimes, it's dressed up as something else entirely: an investment vehicle promising attractive returns. This is where things can get murky, and many investors find themselves disillusioned, wondering where their promised riches went.

Let's dissect how some insurance policies, particularly those with investment components, can create an illusion of returns and potentially leave you feeling fooled.

The Problem: Mixing Things Up

Think of it like a combo meal: you get a burger and fries. But what if the fries cost extra, and you didn't know? That's what happens with some insurance plans.

Lots of Fees: These plans have many hidden costs. They take money for the insurance part, and then more money for the investment part. This leaves less money for you.
Hard to Understand: The fees are often complicated. It's hard to know how much you're really earning.
Locked Up Money: You can't take your money out for a long time, sometimes for 10 or 15 years.

"Guaranteed Returns": Be Careful!

Some plans say they'll give you "guaranteed" money back. But:

The "guaranteed" amount is often small.
There are usually many rules to get that money.
The money might not be worth much after many years because of rising prices (inflation).

Insurance Companies: They're About Protection

Insurance companies are good at protecting you. They're not always the best at growing your money.

They invest your money safely, not always for big returns.
Their main job is to pay out insurance claims, not make you rich.

Agents: They Want to Sell

Insurance agents get paid more for selling certain plans. So, they might push those plans, even if they're not the best for you.

How to Avoid Getting Tricked:

Keep Things Separate: Buy a term plan which has a good balance of claim settlement ratio along with the premium payment, and invest your money separately.
Ask About Fees: Always ask about all the costs before you buy a plan.
Compare Plans: Don't just buy the first plan you see. Check out different options.
Know What You Need: Figure out how much insurance you really need.
Read the Fine Print: Read the contract carefully.
Don't Believe Everything: If something sounds too good to be true, it probably is.