Author
Bowtie Team
Updated on
2025-07-10
Disclaimer: This article is translated with the assistance of AI.
With the property market crashing and the Hang Seng Index dipping below 15,000, businesses are struggling. If you face unemployment or bankruptcy, how should you manage your insurance policies? The Bowtie team dives into this critical topic today.
Should You Cancel Insurance if You Lost Your Job?
Traditional insurance agents often suggest allocating 10% of your annual income to insurance, but this advice isn’t a one-size-fits-all. It might even lead you to overestimate your ability to pay premiums.
If you’re unable to pay due to unemployment, check if your policy includes a Grace Period. Many insurance companies offer a 1-month grace period during which you can pay the premium to keep the policy active.
If you miss the payment even after the grace period, the insurer will consider it a lapse in payment. For products without a savings component (like Bowtie Term Life or Term CI ), the coverage will terminate.
For savings-type products, the mechanism is far more complex. Missing a payment doesn’t mean surrendering the policy. For more details, check out our article on [Missed Insurance Payments] What’s the Impact? Is Skipping Premiums the Same as Surrendering? .
Be Cautious When Surrendering Savings-Type Insurance!
Many users of savings-type insurance assume that surrendering the policy will return at least the premiums paid. That’s a beautiful misunderstanding. If you surrender early, the cash value you get back might be less than what you’ve paid in.
Additionally, the returns on savings-type policies include both guaranteed and non-guaranteed components. Non-guaranteed returns are influenced by factors like investment strategies, performance, claims experience, and operating costs. So, the actual returns might differ from the estimates provided when you signed up.
Facing Bankruptcy? What Happens to Your Insurance?
If your policy has a cash value, such as a whole life (savings-type) insurance, a bankrupt individual may be required to terminate these policies. The cash value or dividends might be used to offset debts, leaving you without insurance coverage.
For non-savings policies like Bowtie Term Life , since a bankrupt person can’t continue paying premiums during bankruptcy, the policy will lapse.
It’s worth noting that if a family member holds and pays for the policy, the bankrupt individual can still remain the insured person under that policy.
Why You Might Need Insurance Even More During a Tough Economy
During economic downturns, not everyone can maintain their usual income or savings to handle sudden illnesses or accidents. Let’s be real—economic conditions don’t change the odds of getting sick or injured.
Worried about a shaky economy or unstable income? Consider term insurance without a savings component. These products work on a “pay-as-you-go” basis (pay for what you use), offering great flexibility. You can even adjust the coverage amount or cancel the policy based on your financial situation and personal needs, without fretting over financial losses from early surrender.
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