You’ve probably heard a friend or colleague say they’re buying an insurance plan that “helps them save money while giving protection.” It sounds reassuring — who wouldn’t want the discipline to save while having a safety net for their family?

But in reality, not everyone ends up happy with their plan. Some get less than they expected at maturity. Others realise they’re underinsured. And some, when life gets tough, stop paying and lose part of what they’ve put in.

So why does this happen? More often than not, it comes down to a few easy-to-avoid mistakes — the kind you only see after you’ve already signed the contract.

Falling in Love with “Guaranteed Returns” — But Forgetting the Costs

A savings-based insurance plan is designed to provide modest, steady returns and a lump sum upon the term’s completion. However, the promise of “guaranteed cash payments” can be so tempting that many people overlook the fact that a significant portion of the amount may go towards fees, administrative charges, or the protection element.

You might think: “I’m paying RM5,000 a year, so I’ll get at least that back every year.” However, in reality, only a portion is allocated to the savings account — the rest is used to fund the insurance component.

Always request a clear and easy-to-understand benefit illustration. It should show you how much you can expect if you stick with the plan, and what happens if you need to surrender it early.

Not Thinking About Real-Life “What Ifs”

Most people sign up during good times — when they have a stable income, minimal commitments, and optimism about the future. But the question is: what happens if you lose your job or face unexpected expenses?

Some plans do offer a small cash value if you exit early, but it’s rarely equal to what you’ve paid in. That’s why it helps to choose a commitment you know you can realistically afford, not just in year one, but for the full term.

Believing It’s the Same as an Investment

This is one of the biggest misconceptions. A savings-based insurance plan is not designed to outperform the stock market. Its returns are generally conservative — because they’re balanced with life coverage and guaranteed elements.

It’s great if you struggle with self-discipline — but if you expect double-digit annual returns, you’ll be disappointed. For higher growth, you’d typically look at unit trusts or other higher-risk investments instead.

Buying Just Because Your Friend Did

In Malaysia, many people sign up through family, friends, or a trusted agent. That’s not a bad thing, but what works for your friend’s life stage may not fit yours. Maybe you’re single, renting, and want flexibility; perhaps they have kids and a mortgage to cover.

Ask yourself: Do you need yearly cash payouts, or would you rather grow a bigger lump sum for something like a house down payment or your child’s education?

Choosing Without Comparing

Finally, don’t assume all savings-based plans are equal. Some have shorter terms, some offer guaranteed acceptance without medical exams, and some give you more flexible payout options.

If you’re exploring a savings-based insurance plan, take your time to read the product brochure. Sit with an advisor you trust. Understand how the plan works if you stick with it, and what you lose if you don’t. It’s not the same as dropping a Netflix subscription — walking away early could mean losing part of your savings.

One Thing to Remember

An insurance savings plan can be a smart tool for people who need structure and peace of mind. However, like all financial commitments, it works best when you know what you’re signing up for — not just the benefits, but the trade-offs as well.

Before you sign, ask yourself: “Will this still make sense if my life changes next year?” The right plan should feel like a safety net, not an extra worry.