Term-life-EN

Term Life Insurance

Q: 2. Does the cause of death affect the amount of compensation in term life insurance?

There are only 2 claim results for term life insurance: full compensation or refusal to compensate . As long as the cause of death is not an exclusion from coverage, the vast majority of insurance companies will make full compensation. The only situation in which compensation is refused is when the insured person commits suicide within a short period (usually 1 to 2 years) after the policy is taken out. In fact, suicide is a common exclusion from life insurance coverage, but each company has different regulations and definitions. To understand the arrangements in detail, it is recommended to carefully read the policy terms and conditions.

Term life insurance (also known as pure life insurance) is one common type of life insurance plan. According to the Insurance Authority, term life insurance was still not the mainstream in the Hong Kong market as of 2019, accounting for only about 6% of the entire life insurance market.

Updated on 2023-05-11

What is Term Life Insurance?

Term life insurance guarantees payment of a stated death benefit during a specified term. Given that term life is generally “pure” insurance, these policies have no cash value other than the guaranteed death benefit.

Who is Term Life Insurance appropriate for?

If you’re the breadwinner of the family, then you need life insurance to protect your loved ones from losing their main source of income in the event of your passing away. Life insurance can provide immediate financial benefit to dependents upon the premature death of the insured person.

So… which life insurance is better for you? Term or others?

Term Life Insurance is much more affordable when compared to other types of life insurance with an investment or savings component. A term life insurance policy is a suitable option for recent, young graduates who may not be on their financial feet yet.

Once you’ve decided to embark on a new journey in life, whether it is getting married or buying a home, it is crucial that you purchase term insurance as it is likely incumbent on you to support your family or pay off a mortgage.

Advantages of Term Life Insurance

Compared to Whole Life Insurance, the advantages of Term Life Insurance include:

Affordability: More affordable than cash-value life insurance
Flexibility: Coverage can last as little as one year (policies usually come in 5-, 10-, and 20-year terms)
Zero loss upon cancellation: Much of the policy’s premiums go towards “pure” life insurance coverage. You can avoid the loss of investment returns, which otherwise happens upon the cancellation of a whole life insurance policy.
Simplicity: Exclusions applicable to most term life insurance policies are similar. Term life insurance is easy to understand, which makes it simple to shop around and compare rates.
Closing the protection gap: According to the Insurance Authority’s 2021 “Mortality Protection Gap Study,” the MPG was estimated to be an average HK$ 1.9 million per EAA (Economically Active Adult). The protection gap can be closed by using more affordable term life insurance products.

Hong Kong Term Life Insurance Premiums

There are two basic types of term life insurance policies: level term and yearly renewable term. Level term means that the premium stays the same throughout the duration of the policy which tends to come in 5-, 10-, and 20-year terms. The yearly renewable term means that the premium either rises or drops, in one-year increments, over the course of the policy’s term.

Therefore, if you’re considering a yearly renewable term life policy, you may benefit from the following comparison of monthly premiums:

25-year-old male non-smoker (yearly renewable term)

1-Million Term Life Insurance
Insurance Plan	Bowtie Term Life	Other Life Insurance*
Monthly Premium	HK$47	HK$50 – $138.3

25-year-old female non-smoker (yearly renewable term)

1-Million Term Life Insurance
Insurance Plan	Bowtie Term Life	Other Life Insurance*
Monthly Premium	HK$27	HK$27.5 – $135

Since the level-term premium incorporates premiums based on future perils, if you’re considering level term life insurance, you may wish to estimate the annualized premium:

25-year-old male non-smoker (10-year renewable term)

1-Million Term Life Insurance
Insurance Plan	Bowtie Term Life	Other Life Insurance*
10-year total premium	HK$5,088	HK$6,500.4 – $24,000
Annualized premium	HK$508.8	HK$650 – $2,400

25-year-old female non-smoker (10-year renewable term)

1-Million Term Life Insurance
Insurance Plan	Bowtie Term Life	Other Life Insurance*
10-year total premium	HK$3,624	HK$5,100 – $24,000
Annualized premium	HK$362.4	HK$510 – $2,400

💡 Bowtie Insight

While it appears that a level-term policy can help you better manage your future premium payments, given that most insurers these days can provide comprehensive premium schedules for your reference, it is not difficult for you to manage your budget even while renewing your coverage yearly. As shown above, with a 1-million term life insurance, choosing to renew yearly can help you save at least HK$1,400 to 20,000.^

*Source: 10Life (Updated in September 2021)
^Premium savings might drop with the increase in age. The actual amount saved is predicated upon specificities of the insurance plan and the insurer’s circumstances.
Note: Calculated premiums above are only for reference. Your actual premiums are influenced by conditions such as time, inflation, and underwriting. You are also required to pay the Insurance Authority’s levy on insurance premiums.

Bowtie Life Insurance Premium Calculator

How much life insurance do I need?

The amount of term life insurance coverage on the market in Hong Kong ranges from HK$ 100 thousand to $10 million. More isn’t always merrier.

The more life insurance coverage you buy, the more you’ll pay. Each family’s financial situation differs from the other. To calculate how much life insurance you need, consider the following factors:

Potential financial burdens for your family	Beneficiaries
Long-term debt (e.g. mortgage)	Spouse or child
Education expenses	Child
Living expenses	Spouse or child
Dependent care expenses	Retired parents or child

Besides the burdens mentioned above, some folks take funeral expenses into consideration when calculating how much life insurance they need. For a more accurate estimation of the coverage amount you need, we suggest using the Bowtie Personalized Coverage Calculator to help you meet your coverage needs.

💡 Bowtie Insight

Certain medical or critical illness insurance policies already provide some level of life protection. We suggest that you be mindful of this to avoid unnecessary premium costs.

💡 Bowtie Insight

Some medical or critical illness insurance plans may provide a small amount of life insurance coverage, and we recommend taking this into consideration to reduce unnecessary premium expenses.

Why choose Bowtie Term Life Insurance?

Bowtie Term Life is geared towards addressing a major social challenge—the protection gap. According to a study by the Insurance Authority, the overall size of the MPG in Hong Kong was around HK$ 6.9 trillion, which translates to about 5.4 times weighted average annual income per economically active adult.

The biggest selling point of Bowtie Life Insurance is the absence of an insurance intermediary. Policyholders can get insured online in a snap, not only saving on intermediary fees but also paying most of their premium payment toward their life protection. Other advantages include:

💰 Cost-effectiveness: Same premiums, but higher benefits. For a policy with $1 million in coverage, the monthly premium can be as low as $24³
✅ Guaranteed renewal: Bowtie guarantees automatic renewal of policy without the need for new underwriting until the policyholder reaches the age of 100.
✍️ Streamlined underwriting: You only need to answer 3 simple questions to access your underwriting decision.
👍 Exclusions are next to none: Keeping an ear to the ground, Bowtie has eliminated most exclusions, only retaining the short-term suicide exclusion provision to match industry standards for flexibility.
🚀 Get insured anytime, anywhere: Policyholders only need to answer 3 questions online to access underwriting approval. The process takes as little as 10 minutes.
🕒 Claim online anytime, anywhere: To submit their claim, Bowtie customers only need to answer a few simple questions and upload relevant documents. Once approved, claim payments are deposited directly into customers’ bank account within 5 working days.

Term Life Insurance FAQs

1. How to choose a term life insurance plan?

Term life insurance operates relatively simply: under normal circumstances, when the insured person dies, the beneficiary can receive compensation.

Therefore, when comparing different products, the policy premium should be considered first. Many insurance companies may offer first-year discounts, but life insurance is a long-term protection, so the policy premium before any discount should be compared to understand the true cost.

Of course, insurance is an important decision, and in addition to considering the reputation of the insurance company, the following two points can also be considered when choosing a term life insurance plan:

1. Geographical restrictions on coverage: If the plan only provides compensation for insured persons who pass away in Hong Kong, and you are about to immigrate to Canada, this policy may not be suitable for you.

2. Exclusions from coverage: Each plan’s exclusions from coverage may vary. For example, products on the market usually specify that if the insured person commits suicide within 1 to 2 years from the policy effective date, it will not be covered. In addition, each insured person may also need to accept additional exclusions from coverage based on their physical condition. Everyone can choose different plans according to their own needs.

2. Does the cause of death affect the amount of compensation in term life insurance?

There are only 2 claim results for term life insurance: full compensation or refusal to compensate.

As long as the cause of death is not an exclusion from coverage, the vast majority of insurance companies will make full compensation. The only situation in which compensation is refused is when the insured person commits suicide within a short period (usually 1 to 2 years) after the policy is taken out.

In fact, suicide is a common exclusion from life insurance coverage, but each company has different regulations and definitions. To understand the arrangements in detail, it is recommended to carefully read the policy terms and conditions.

3. How to buy term life insurance?

The terms and conditions of term life insurance are simple, and many insurance companies have launched online application systems, where underwriting, payment, and approval of policies can all be done online.

It only takes a few minutes for the applicant to complete the purchase process directly online. On the other hand, applicants can also apply for term life insurance through insurance products comparison platforms, banks, traditional brokers and agents.

4. How to make a claim for term life insurance?

Generally, the beneficiary only needs to provide the insurance company with the “death certificate” of the insured person to receive a lump sum compensation according to the policy contract.

The claims procedures may differ among different insurance companies, so it is recommended to inquire with the underwriting company.

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Bowtie Team

The Bowtie Life Insurance Company Limited is an authorized life insurance company and Hong Kong’s very first virtual insurer approved. Through the use of modern technology and medical expertise, Bowtie offers an agent-free, commission-free and more convenient online platform for customers to quote, apply and claim for Voluntary Health Insurance Scheme (VHIS) anytime anywhere. Bowtie is ranked first in the direct channel sales throughout 2021.

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