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Term Life Insurance in Hong Kong: What to Know Before Buying

Looking for good-value life protection? Term life insurance may be your best option.
Last update:
14th September 2022
alea
Reviewed by a licensed advisor
happy family with daughter in the middle smiling
happy family with daughter in the middle smiling
Looking for good-value life protection? Term life insurance may be your best option.
Last update: 14th September 2022
Contents

About Alea
Alea is one of Hong Kong's leading health insurance brokers with years of experience navigating the complex insurance market. We can help you save time and money by offering you choice of 100+ options from 25+ insurance companies. Our trusted advisors are ready to answer any questions you may have!


Know your options before deciding. Find the best term life insurance policy for you.

If you are shopping around for life insurance, you have probably come across the division between term and whole life insurance. In this article, we will explain in detail what term life insurance is and guide you through its pluses and minuses so that you can make the right choice for yourself and your loved ones based on the right information.

Don't miss our recommendations for the best term life plans in Hong Kong!

What is term life insurance?

Term life insurance, also known as pure life insurance, is a risk management tool that can pay out a large sum of benefit to your family members or any named beneficiary in the unfortunate event that you (the insured person) pass away within the specified term of the policy, usually 10, 20 or 30 years.

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How does term life insurance work?

As the policyholder, you have to pay a monthly or annual premium to the insurance company over the policy term. Should you or the insured person die during the policy term, a lump sum called “death benefit” will be paid to your beneficiary/beneficiaries.

Although the policyholder may often also be the insured, one can also take out life insurance on a spouse, a parent, a child or even a business partner with their consent, and be the beneficiary.

All insurance benefits are tax-free in Hong Kong, the beneficiary can receive the full coverage without deducting the tax.

Term life insurance in general does not have a savings component and is more suitable for those who are exposed to huge financial risks such as large sums of mortgage, loans or debts.

What would happen when the term ends?

As the policy term ends, the policyholder has the option to renew the cover or convert it to a whole life policy after undergoing a new underwriting process by the insurer.

If you decide to discontinue your coverage after the term ends, the plan simply expires with no retrievable value. An exception is Return of Premium (ROP) plans, a subcategory of term life insurance that gives you the option to refund the total amount of premiums paid when you outlive the policy. ROP plans have higher premiums than regular term policies.

Do I need term life insurance?

Your insurance needs always depend on your life planning, whether you are starting a family, buying a property, preparing for retirement or looking to protect your business.

As you enter different stages of life, a life insurance policy secures your family from future uncertainties by providing financial stability in case any misfortune happens, especially if you are the breadwinner of the family. The reimbursed amount can be spent on payments such as:

  • Debts
  • Mortgage or rent
  • Car loan
  • Funeral costs
  • Education fund for children
  • Living expenses of dependents

The best timing to get insured? When you are young and healthy – such that you can enjoy peace of mind and protect your loved ones after death – at the same time minimizing the risk of having pre-existing conditions that will likely lead to exclusions by insurers.

Term life vs. whole life insurance: Which one do I need?

Now you know what life insurance is for, so what makes term life plans different from whole life ones? Let us break it down for you.

Term life insuranceWhole life insurance
Period of coverageWithin the term of 10/20/30 yearsLifetime or up to 100 years old
Insurance benefitDeath benefit paid to beneficiariesDeath benefit paid to beneficiaries
Amount of benefit (assuming the same amount of premium)Very highLower
Premiums- Lower
- Level premium which may increase with age at policy renewal
- Higher
- Level premium paid within an installment period of 5-25 years
Savings elementNoYes
Cash valueNoYes

Term life insurance may be a better choice if you are looking for relatively short-term protection, especially if you are dealing with liabilities, i.e. loans, mortgages, debts. For the same amount of premium paid, a term life plan can provide a much higher amount of coverage upon payout than a whole life plan.

Conversely, if you are interested in lifelong coverage with a savings element, a whole life plan will give you peace of mind once and for all.

Not sure which is better for your situation? Have a chat with our advisor to explore your options!

How Alea can help you save on insurance

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How much coverage do I need?

When assessing your coverage amount, estimate 10-15 times your annual income or simply add up your liabilities. This sum of money can be used towards repaying mortgage or loans, funeral costs or covering living expenses of the family while you are not around.

Everyone has a different story and it is best to consult an experienced advisor before signing a policy.

➜ Expert tip: More and more people prefer to split their investments into a critical illness policy, for their own use if they fall gravely ill, plus a life policy, to leave their family peace of mind in case the worst happens.

How much does term life insurance premium cost?

After your application, the insurer will assess your risk by asking you to fill in an underwriting questionnaire and sometimes undergo a body checkup (if your coverage exceeds a certain amount, e.g. US$500,000). Below are some factors that may affect how insurance companies determine your premiums:

  • Age
  • Gender
  • Health
  • Smoker or non-smoker
  • Obesity
  • Lifestyle
  • Family medical history
  • Coverage needed

At Alea, we offer plans with level premiums – premiums that stay the same throughout the life of the policy, regardless of changes in your age or health condition. However, note that you are subject to a premium increase at each renewal as you age if you decide to get coverage for another term when the current policy ends.

The best way to find out the cost of a life insurance policy is to get a free quote from your insurance broker. This will help you compare coverage and premiums, and make the best choice.

Compare term life insurance plans: which one is right for me?

Alea advisors will guide you through your application process. We work with AXA, Chubb, FWD, Sun Life, Generali and 25+ renowned insurers to offer you the best choice.

As an expert in life insurance, Alea has all the latest product and market information you need. We go the extra mile to guide you through your options and find the right plan, tailored for you. Get in touch with an advisor today to compare different term life plans in Hong Kong.

FAQs

What is term life insurance for?

Term life insurance pays out a lump-sum death benefit to your family (or any named beneficiary) should you (or the insured person) pass away within the policy term. The payment can then be spent by your living family on mortgage, rents, debts, funeral costs, living expenses, education and the list goes on.

What is the age limit for buying term life insurance?

Most term life insurance plans can only cover the insured person up to the age of 65-80. Insurers may decline applications or renewals from applicants older than their specified age limit.

How much life insurance coverage do I need?

Experts suggest multiplying your annual income by 10-15 times to estimate your cover amount. When calculating your ideal coverage, you should consider the living expenses of your dependents, education fees for your children, as well as any liabilities of the family, susceptible to future inflation.

Is term or whole life insurance better?

It may sound clichéd, but your insurance needs always evolve with your life planning. So when you are comparing your options, bear in mind the strengths and limitations of each product. For example, term life plans only cover you for a limited period of time; whole life plans, though offer lifelong protection, can cost a few times more expensive.

Do I get my money back at the end of a term life insurance?

No. Your term life insurance simply expires with no retrievable value. An exception is Return of Premium (ROP) plans, a subcategory of term life insurance that allows you to refund the total premium paid when you outlive the policy. What’s the catch? ROP plans have higher premiums than regular term policies.

Our advisors help you save time, money & worries. Contact us!

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This article was independently written by Alea and is not sponsored. It is informative only and not intended to be a substitute for professional advice and should never be relied upon for specific advice.