Author
Bowtie Team
Updated on
2025-06-19
Disclaimer: This article is translated with the assistance of AI.
No matter where you are, mastering estate inheritance is a smart financial move. Even without estate tax in Hong Kong, life insurance helps you pass assets to loved ones faster and clearer—and if you’ve moved abroad, it could save your family significant taxes!
Does Life Insurance Serve as an Estate Inheritance Tool?
Life insurance is one of the oldest forms of personal insurance. When the insured unfortunately passes away, the policy provides a lump-sum compensation to the deceased’s relatives. This amount can be used for funeral arrangements or as ongoing living expenses for the family, offering solid support when it’s needed most.
These days, many wealthy individuals buy life insurance during their lifetime and use the beneficiary designation to pass on the payout directly to named relatives. Unlike traditional estate inheritance, which can get complicated, life insurance makes the process straightforward and clear-cut. That’s why using large life insurance policies as a tool for estate planning is a popular strategy around the world.
Generally speaking, both term and whole life insurance can handle estate inheritance functions; as long as the policy names a Beneficiary , 100% of the compensation can be distributed to one or more people without it falling into the estate—it’s paid directly to them.
Benefits of Using Life Insurance for Wealth Inheritance?
1. Asset Growth
Savings life insurance not only passes on the policy’s sum assured but can also grow in value through dividends during the policy term. If you play your cards right with this feature, it’s not just about inheritance—it’s a smart way to build wealth over time. In recent years, high-value, single-payment savings life insurance policies have become a go-to for this kind of asset-boosting inheritance strategy.
2. Life Insurance Payouts Bypass Estate Processing
Estate settlement can be a real headache—without a proper will, it might lead to disputes over inheritance rights and even family feuds, leaving assets tied up for ages.
With life insurance, you can name beneficiaries and specify payout percentages, keeping it separate from the estate process . This means the money gets to your loved ones quickly and efficiently, making it a more effective way to handle inheritance.
3. Flexible Beneficiary Changes
Even with a valid will, if you want to tweak it—say, just a small change—you’re looking at drafting an entirely new one, which could involve extra costs.
On the flip side, life insurance is much more flexible; for most policies, you can update beneficiaries for free by simply submitting the right form . I’ve handled several cases like this in my career, such as couples changing beneficiaries after a divorce—it’s that straightforward.
4. Easier Estate Distribution (Percentage-Based vs. Assets Like Property or Stocks)
Policy payouts are more stable than assets like property or stocks, and with the percentage allocation system , it’s a breeze to divide among multiple beneficiaries when the insured passes away. Plus, unlike physical assets that aren’t always easy to split, life insurance makes inheritance distribution simple and fair.
5. Avoiding Estate Taxes (For Emigrants)
While Hong Kong scrapped estate taxes back in 2005, many Hong Kong residents hold foreign passports or have moved abroad, so their estates could still face hefty taxes—up to 50% in some places . Life insurance sidesteps this by transferring value directly to beneficiaries outside of the estate process, which is why it’s a longtime favorite for inheritance planning. Keep in mind, tax laws vary by country, so consult a local expert before proceeding.
Drawbacks of Using Savings Life Insurance for Wealth Inheritance?
Lately, people have been turning to large savings life insurance policies for wealth transfer, sometimes even financing them to maximize growth. But here’s the catch: dividends on savings insurance aren’t guaranteed, and only a few policies maintain a long-term 100% dividend realization rate . On top of that, with recent interest rate hikes, financed policies could end up losing value or even declining overall.
What’s more, savings life insurance doesn’t offer the same leverage for coverage as term life insurance , so if you’re aiming for a massive payout, it might not be the best fit.
Leverage Term Life Insurance for Enhanced Protection
For young families, term life insurance is a more suitable tool, allowing you to get the maximum protection with minimal premiums. This helps safeguard the assets you’ve just built and leaves substantial living expenses for your family.
Take home ownership as an example: Most young people, while enjoying the thrill of their first property purchase, also shoulder mortgages in the hundreds of thousands. If the family’s breadwinner passes away before the mortgage is paid off, the surviving spouse would be left to support the family alone and handle the payments—talk about adding insult to an already devastating loss.
On the flip side, with just a few hundred dollars in monthly premiums, you can leverage millions in term life insurance coverage. This means that if the family’s main income earner passes away unexpectedly, the payout could clear the home mortgage or cover living expenses, helping your loved ones carry on with dignity.
Choose Bowtie Term Life!
High value-for-money and high-leverage life protection is your family’s safety net. Bowtie Term Life provides a lump-sum compensation to the beneficiary upon the insured’s death, with key features including:
- Pure protection, with no savings component
- Under the same premium, coverage is 40 times higher than general savings life products*
- For every $1 million in coverage, monthly premium as low as $38
* Based on standard premiums for a 35-year-old non-smoking female insuring $1 million; Term Life Insurance: Data as of July 1, 2020, for standard premiums of term life insurance (20-year coverage period) in the market
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