life-insurance-HK02

 

                                               

 

DO YOU NEED A LIFE INSURANCE?

 

Life Insurance, also known as Term Insurance, provides you with the lowest cost insurance coverage that you can find.

  

Life insurance provides simple and straightforward death benefit protection without any of the expensive cash value and investment component add-ons. This means that if you pass away during the term of the policy, the insurer will pay your beneficiaries a specific sum of money. There is no cash value upon maturity, meaning that should you outlive the maturity of the term insurance policy, you do not get back any value.

 

However, do remember that there is no free lunch in the world – you do end up paying more premiums for the cash value or investment add-ons.

 

Because Life Insurance is so simple and straightforward, it is perhaps one of the most price competitive insurance products you can find. We strongly suggest you use our price comparison website to get the best quote from different competing insurers.

 

* HK$138 monthly premium quoted is the rate for a healthy Male aged 35.

 

 

 

IS LIFE INSURANCE A WASTE OF MONEY?

 

A wrong way to think about Life Insurance would be that you have wasted your money on buying Life Insurance if you don’t die during the term of the policy or that you don’t get any cash value back should you outlive the life of the term policy. No one ever thinks that you have wasted money by buying car insurance but never having a car accident!

 

Life Insurance actually "buys" you a peace of mind with the largest insurance protection for your premium dollar. After buying the Life Insurance policy, you now know that if you pass away during the policy term, your loved ones will be better protected financially. Moreover, because there is no cash value, the price of Life Insurance is much cheaper than other insurance products!

 

 

 

WHO SHOULD BUY LIFE INSURANCE?

 

Life Insurance is the most basic insurance product that you will need if you have loved ones who are financially dependent on you. Your dependants may include:

 

  • Children;
  • Spouse who is not working; or
  • Elderly parents who rely on you for an allowance.

 

Because Life Insurance provides you with the lowest cost insurance coverage that you can find, young working adults should get term insurance as one of their first insurance policies. Life Insurance is valuable and important for people with limited means or savings because of its affordability and the security it can provide.

 

 

 

HOW MUCH LIFE INSURANCE COVERAGE DO YOU NEED?

 

Your coverage need will depend on your individual circumstances.

 

Ask yourself the following questions:

 

  • How much of the family income do I provide?
  • If I were to die, who will be impacted negatively and how much do they need monthly/yearly? You should consider your spouse, children, grandchildren, parents, grandparents, siblings etc.
  • What about the educational needs of you children? Do you plan to send them overseas for their education?
  • Any outstanding loans (mortgage, auto, credit cards etc)?
  • Any other final expenses (medical bills, burial costs etc)?
  • Any family members or organisations to whom I would like to leave money to?
  • How will inflation affect the future needs?

 

A simple starting point is to take a multiple of your annual income and adjust for the factors listed. Typically, insurance experts suggest you buy 5 to 10 times your current annual income.

 

We strongly suggest you go through our Life Insurance Calculator to figure out a more accurate figure.

 

Do keep in mind that your family needs will most likely increase over time, especially as you grow older and earn more in the future. What seems like enough today may not be adequate in ten years. It is usually best to purchase an amount you can afford at the present time while at the same time considering your future needs.

 

 

 

 

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DIY TIP

                                 

Buy Term Insurance at the prime ages of 30 to 40 to keep your premiums low in the future.

 

Term products have more strict underwriting requirements as the premiums are very low compared to the benefit provided. This means that you could be rejected or have to pay additional loadings to get cover when you are older and your health has deteriorated. 

 

 

 

 

WHAT IS THE RIGHT LENGTH OF LIFE INSURANCE COVERAGE?

 

Your coverage length will depend on your individual circumstances. Factors you should consider include your age, your spouse's age, your children's ages, and the length of your financial obligations (e.g. mortgage, auto and student loans). You will want to choose a term period that covers all of the above factors.

 

You may also consider buying multiple term policies with different sum assured and different term period to cover different financial obligations. For example, if you have a five-year old child and you wish to support that child through university or an advanced degree, you need a policy term period of 18 to 22 years.

 

You may also consider having another term policy that covers your mortgage loans that corresponds to the mortgage tenure. Or you could also consider buying another term policy with a shorter maturity to cover your obligations to your aging parents.

 

 

 

WHAT DOES A LIFE INSURANCE PRODUCT LOOK LIKE?

 

You will have to pay regular premiums to the insurance company over the policy term. The amount of premium will depend on the coverage amount, your age, the policy term and your health conditions.

 

Depending on the product that you choose, the premiums may be guaranteed to be constant throughout the policy term or may change from year to year*, increasing as you grow older.

 

The main benefit of Life Insurance is to provide a cash payout benefit upon death. However, there may be a few minor variations that are added to the product:

 

  • Terminal Illness: pays out the sum assured earlier to you if you are certified by a doctor that you will likely pass away within 12 months.
  • Total and Permanent Disability: pays out the sum assured earlier to you if you are permanently disabled.
  • Waiver of premiums: if you are critically ill, the premiums on the policies are waived.

 

 

The above are subject to the definitions as set out by the insurance companies.

 

* or a specified guaranteed period, e.g 5 years