How to Compare Life Insurance
When comparing life insurance, there are 10 factors to consider, including:
- Type of insurance
- Premiums
- Exclusions
- The flexibility of adjusting premiums
- Benefit term
- The convenience of managing the policy
- Claims procedure
- Contribution period
- Return on investment
- Administrative fees
First, compare the Types of Life Insurance
There are 2 main types of life insurance to choose from, “Term Life” and “Whole Life”. We suggest you to start by comparing these two types of life insurance:
| Term Life | Whole Life | |
| Benefit Term | Usually available in 5-, 10-, and 20-year terms When the policy expires, it typically allows you to renew until you reach a specified age. | Lifelong coverage (or until the insured person turns 100) |
| Premium | Approximately HK$42 – $2001 | Costs 28%2 more than Term Life |
| Death Benefit | Yes | Yes |
| Cash Value | No | Yes |
| Premium Structure | Level-premium/ yearly-renewable | Level-premium/ limited-payment |
| Brief Note | Although term life insurance does not have a cash value, most of the policy’s premiums go towards life insurance coverage, rendering it a cost-effective option. | A whole life policy has a savings component that can build cash value over the years, but it costs more than term life insurance. If you decide to give up or surrender your policy, you may incur losses. Nevertheless, as long as you can keep up with the premiums, it is a legitimate option. |
At the end of the day, if you wish to buy a lower-cost, pure life insurance, you should focus on comparing term life insurance policies; if you fancy letting an insurance company invest for you, you can consider whole life insurance, and based on the criteria suggested above, compare the different policies available.
- 1Sample rates are for a policy with $1 million in coverage for a 35-year-old female non-smoker; term life: the average standard premium, as of 1 July, 2020, for term life insurance (20-year term) on the market (including digital term life insurance and 8 other term life insurance plans); cash-value life: the average premium, as of 1 July, 2020, for 8 cash-value life insurance (20-year term) on the market.
- 2In 20 years, the total premium cost for Bowtie Life Insurance would be lower than the total average premium cost for other term life insurance (20-year term) on the market by 28%; sample rates are for a policy with $1 million in coverage for a 35-year-old female non-smoker; data is derived from the average standard premium, as of 1 July, 2020, for term life insurance (20-year term) on the market (including digital term life insurance and 8 other term life insurance plans).
How to compare Term Life Insurance?
Term Life Insurance is pretty straightforward. You may compare the following 6 major facets when comparing various term life policies: the premiums, exclusions, the flexibility of adjusting premiums, benefit term, the convenience of managing the policy, and claims procedure.
1. Premiums
Term life insurance clauses are mostly identical across insurance companies. Given that the policy is in force, most insurers pay out the full proceeds at the death of the insured. In other words, the premium is a decisive factor to consider. As shown in the table below, for the same coverage, you could be paying HK$1,296 more annually:
25-year-old male non-smoker (yearly renewable term)
| 1-Million Term Life Insurance | ||
| Insurance Plan | Bowtie Life Insurance | Other Life Insurance* |
| Annual Premium | HK$564 | HK$600 – $1,660 |
25-year-old female non-smoker (yearly renewable term)
| 1-Million Term Life Insurance | ||
| Insurance Plan | Bowtie Life Insurance | Other Life Insurance* |
| Annual Premium | HK$324 | HK$330 – $1,620 |
2. Exclusions
According to the Insurance Authority Study Notes, “In life insurance, the cause of death is not critical, unless a suicide exclusion clause operates or an accidental death benefit rider applies.” Hence, most insurers only build in one exclusion clause: the suicide exclusion, with a 12-to-24-month exclusion period.
| Suicide exclusion | Bowtie | Other insurers* |
| Exclusion period | 12 months | 12 to 24 months |
If an insurer excludes coverage for other things, for instance, high-risk activity or occupation, then you must evaluate whether the plan befits you.
3. The flexibility of adjusting premiums
Some insurers allow the customer to adjust premiums at certain ages or significant life stages throughout the policy’s term. Notably, according to the Bowtie Term Life Insurance policy provisions, policyholders can freely adjust their premiums.
The provision states, “You may request to adjust the premium at least thirty (30) working days before the expiration of the policy’s existing term.”
Term life insurance provides coverage for a predetermined period of time. Therefore, as the insured, you must consider the length of coverage. In general, the monthly premium stays unchanged throughout the term. Term life insurance on the market generally provides coverage for 1-, 5- or 10-year terms, but some policies have a 30-year term.
Bowtie Term Life Insurance provides coverage for 1-year term. The premium amount may be adjusted after a year. But fear not, to help you with budgeting, before you purchase the insurance, the system will display your projected insurance premiums within the next 5 years.
How well an insurance company allows its customers to manage their policies online effortlessly is vital to its success. Since the structure of term life insurance is relatively straightforward, the insured can save a ton of time if they can obtain the quotation, get insured, go through the underwriting process, and even make a claim fully online.
However, not all insurance companies offer a hassle-free insurance application process and policy management system. Some insurance companies still rely on traditional channels that involve physical intermediaries, which means that customers have to contact agents or brokers, and in some cases, become a bank’s client to obtain a preliminary quotation or make an insurance application.
Bowtie’s cutting-edge online underwriting system allows customers to apply for insurance anytime, anywhere. What’s more, customers can instantly check whether they are eligible for coverage and find out the premium costs. Once signed in, customers can also easily manage their policies. Without having to set up an account, you can obtain a preliminary quotation and figure out how much coverage you need through the Premium Calculator and Coverage Advising Tool.
| Bowtie | Other insurers | |
| Application Process | Apply online directly | Might have to apply through intermediaries or by becoming a bank’s client |
| Underwriting | Answer a few questions online | Might have to undergo health screening and provide a health certificate |
| Quotation | Obtain a preliminary quotation without having to set up an account | Might have to contact intermediaries to obtain a preliminary quotation |
| Get Your Quote Now | ||
| Coverage Calculator | Yes | Chat with intermediaries in-person to obtain advice |
| Get Personalized Recommendations |
Following a loss, a beneficiary must file a claim to receive the death benefit payout. An intelligible, streamlined claims procedure can make all the difference.
When choosing an insurance company, we suggest that you check whether the insurer has a webpage on claims settlement and, if they do, whether the page details the claims procedure and necessary documents.
Moreover, the beneficiary is frequently the insured’s most beloved. An insurance company that provides the option to file claims online can help the beneficiary, who is most likely besieged by grief while settling all kinds of affairs, go through the claims and payout process as painlessly as possible.
- *Source: 10Life (Updated in October, 2021)
How to compare Whole Life Insurance?
If you’re planning to buy whole life insurance, in addition to the 6 criteria mentioned above, you have to consider many more complex factors. While comparing different whole life insurance policies, you have also to consider contribution period, return on investment, and administrative fees:
1. Contribution period
Whole life insurance lets you pay off your policy in around 20 to 30 years. You should appraise your financial ability to maintain those high whole life premium payments before making the leap.
Whole life insurance and mortgage are similar in that once you stop paying towards it, you may lose most or all of the value of the premiums you’ve already paid.
2. Return on investment
All investments involve some degree of risk. The fact is no investment ever completely ensures that you will make money. Simply put, when a customer pays their monthly premium, the insurance company takes the money and invests in the financial markets.
If the insurance company gains positive returns, the company pays the customer a portion of its profits. In other words, the majority of your premiums do not contribute to your death benefit coverage.
Therefore, before buying whole life insurance, you should find out if the policy gives you “guaranteed returns” and how much it constitutes. You might also compare other investment vehicles, such as real estate, bonds, and stocks, so that you can make an informed decision.
Whole life insurance costs more, not only due to the added investment vehicle but also because a portion of your premium payment covers the insurance company’s operating costs and profits.
When you choose to surrender your policy in the middle of the term, the insurer suffers losses. You then risk not only losing your invested money but also incurring additional surrender fees.
Therefore, to avoid ending up in a hole, it is paramount that you check whether a policy asks for discontinuation charges or miscellaneous fees before making a purchase.
