Author
Bowtie Team
Updated on
2025-06-13
Disclaimer: This article is translated with the assistance of AI.
Switching policies often refers to life insurance transfers, where you withdraw funds or cut premiums to save money and secure a new plan. But beyond life insurance, many rethink their coverage annually due to rising costs or outdated benefits. Discover the risks, perks, and key tips for switching insurers—dive in and make smarter choices today!
What is Insurance Switching? Definition and Meaning
In the insurance industry, “switching insurance” typically refers to “life insurance switching”.
When the policyholder (1) withdraws part or all of the funds from an existing Life Insurance policy, or (2) uses the amount saved by reducing the premiums of an existing life insurance policy to purchase a new life insurance policy, and this transaction occurs within 12 months before or after the new policy takes effect, it is considered “switching insurance”.
- Withdrawing at least 50% of funds from an existing life insurance policy, which may include:
- Surrender value
- Policy loans
- Policy value, such as Bonuses
- Reducing the premiums of an existing life insurance policy (by at least 50% of the sum assured) through methods such as:
- Reducing the sum assured to pay premiums in full
- Allowing the policy to lapse: stopping premium payments
- Using the “premium holiday” option: applying for a temporary payment suspension
Transactions Not Considered as Insurance Switching
- Policies converted from an existing life insurance policy where the terms and conditions are based on the original life insurance
- New life insurance policies offered by the same insurer without the need for re-underwriting
- Additional life coverage attached to the original life insurance and its terms, where the original policy has not been modified
- A new policy replacing one canceled within the cooling-off period
Main Risks of Switching Insurance Policies
Switching policies can bring substantial and potential risks, even losses, to the policyholder. Therefore, before deciding to switch, you must consider the following two main points:
1. Financial Risks
- Some policies specify that upon surrender, the policyholder needs to pay ‘surrender fees’ or ‘additional expenses’, so your decision could result in extra costs
- You might completely lose the cash value or dividends of your existing life insurance policy
- Life insurance with investment or savings components has cash value or dividends, and if you surrender the policy, the surrender value might be less than the total premiums paid
- If you choose to use a ‘policy loan’ to buy new life insurance, it might involve ‘interest’
- If the account value and cash value of the original life insurance policy are insufficient to cover the loan and interest, the policy could lapse, and you might lose your life coverage
- The returns on a new life insurance policy can be divided into guaranteed and non-guaranteed returns
- If you include ‘ non-guaranteed returns ‘ in the calculation, the benefits of switching might be much lower than expected
- When applying for new life insurance, premiums may increase due to age or changes in health status, potentially higher than expected or renewal premiums, leading to higher total expenses than anticipated
2. Coverage Risks
- When getting new life insurance, coverage may be reduced due to age or changes in health status, resulting in lower coverage than expected
- If your existing life insurance policy lapses, you will lose coverage and will only rely on the new policy, which could create a ‘waiting period’ and lead to a ‘coverage gap’
- For example: Many life insurance policies only cover suicide after one to two years from the policy’s effective date. During the first one to two years after switching, if unfortunately someone passes away due to suicide , your family won’t receive compensation.
If you want to ‘switch policies’ simply because ‘it’s not enough coverage’, you should consider adding Term Life Insurance while keeping your existing policy.
Under the same coverage amount, Term Life Insurance can save you 28% on premiums 1,2 . For example, with Bowtie Term Life , HK$1 million in coverage costs as little as HK$38* per month. This way, you can dodge the risks we mentioned earlier and get even more protection without the hassle.
With Bowtie Term Life , monthly premiums could be less than the price of a lunch—seriously, no need to worry about breaking the bank by boosting your life coverage.
- 1 Based on standard premiums for a 35-year-old non-smoking female with HK$1 million coverage; Term Life Insurance: Data is the average of standard premiums for term life insurance (20-year term) on the market as of July 1, 2020 (including online-purchasable options and 8 other term life insurances); Savings-type Life Insurance: Data is the average of premiums for 8 savings life insurance products (20-year premium payment period) on the market as of July 1, 2020.
- 2 Over 20 years, the total premium for Bowtie Term Life is 28% less than the average total premium for market term life insurance (20-year term).
- * The above price is based on the monthly standard premium for a 30-year-old non-smoking male with HK$1 million coverage under Bowtie Term Life.
Documents to Sign and Key Considerations Before Switching Policies
When deciding to ‘switch policies’, the policyholder generally needs to sign a ‘Client Protection Declaration’ to ensure that the insurance intermediary has fully explained the actual and potential risks involved.
As the policyholder, it’s smart to read the ‘declaration’ carefully and analyze the insurance intermediary ‘s advice before signing—it’s your best defense to protect yourself and avoid any losses.
Other Key Considerations
After signing a new life insurance policy, you’ll have at least a 21-day cooling-off period where you can cancel the life insurance unconditionally. We recommend reviewing the policy terms during this ‘cooling-off period’ to make sure the coverage aligns with your expectations and needs.
For professionals, “switching policies” typically refers to “life insurance switching,” but in reality, when people mention “switching policies,” they often consider Health Insurance or Critical Illness Insurance switching.
So, what should you watch out for and consider when switching “Health Insurance” or “Critical Illness Insurance”?
Switching Critical Illness Insurance
Like life insurance, many critical illness policies include “savings” or “investment” components, so when considering a switch, you face similar risks as mentioned earlier, such as:
- Policyholders may lose all cash value or bonuses
- Policyholders may lose coverage or experience a “coverage gap” during the switch
- Or end up paying higher premiums due to age or health changes to get the same or greater coverage
If your original Critical Illness Insurance doesn’t have a savings component, you can simply compare the “coverage” and “premiums” to decide whether to switch. It’s a win if you can get more comprehensive coverage for less!
Nowadays, the market offers more diverse types of Term CI products, including those with Multiple Cover , even unlimited claims for critical illnesses. Keep an eye on new launches to ensure you’re covered more thoroughly—smart planning pays off!
Term CI policies now offer multiple covers! Cancer recurrence is on the rise, but most term CI options out there only pay out once—talk about missing out on second chances.
Bowtie Term CI Multiple Cover , with its market-exclusive design, lets you claim multiple times for 3 major illnesses (cancer, stroke, and heart disease), paying out 100% each time, up to 5 claims total. For a non-smoker, 30-year-old man with HK$500,000 coverage, it’s just HK$59 per month.
Apply for Bowtie Term CI Multiple Cover
But remember, don’t cancel your existing policy until your new one is approved—avoid coverage gap! If the new policy doesn’t go through, at least you’re still protected.
Switching Medical Insurance
Since most Medical Insurance has no savings component, there are fewer factors to consider, and people usually compare based on two main aspects: “premiums” and “coverage.”
When it comes to “premiums,” policyholders often think about whether their current policy is too expensive and evaluate its value for money. For instance, if there are two policies with similar coverage, they tend to go for the cheaper one. As for “coverage,” some people decide on switching by checking if their existing policy fully meets their medical needs, and whether it’s worth switching to another one at a similar price that better fits their requirements.
In reality, everyone’s medical needs change over time as they age, and their financial situation might evolve too (like after starting a family, when expenses rise and you’d naturally want to cut costs elsewhere). So, it’s perfectly normal to review your coverage annually.
But we must remind you again—don’t cancel your existing policy until your new one is approved, to avoid any gaps in coverage. Plus, if the new policy isn’t approved, you’ll still have your original medical protection!
Common Reasons for Switching Insurance Plans
Switching insurance involves a lot of considerations, fine print, and processes, and the calculations can get pretty complex. So, what might prompt the average person to think about or actually go through with it? Truth be told, most people consider switching for a handful of common reasons:
- When reviewing coverage, you find that your Coverage falls short
- Premiums are too high to afford, or you’d rather get the same coverage for a more budget-friendly price
- You originally signed up through an Insurance Intermediary , but you’re unhappy with their service; or your original intermediary left, and the new broker or agent from the insurance company isn’t up to par
- Your claim gets denied, leaving you frustrated with the insurance company or intermediary
In fact, switching isn’t always a bad move—it’s essential to regularly check your coverage and policy terms . As mentioned earlier, your medical needs or financial circumstances can change, so your insurance should adapt too; otherwise, you might regret not having enough when you need it most.
However, this decision can come with risks, especially for policies with a savings component, where things get even trickier. So, tread carefully—if you’re unsure about your switch, it’s smart to seek advice from a pro.
Bowtie , as Hong Kong’s first Virtual Insurance company, doesn’t have insurance intermediaries, but our customer service and claims teams are here to offer expert advice on policies and claims, helping you handle everything online with ease.
Without intermediary fees, Bowtie can provide higher coverage at a more affordable price!
Benefits of Switching to Bowtie
- No Commissions: Bowtie’s insurance products are sold directly online without agents, brokers, or other intermediaries. This means Bowtie doesn’t have to pay any intermediary commissions or related administrative costs (such as office rent and equipment), so the premiums you pay go as much as possible toward your coverage, offering better value at lower rates.
- High Value for Money: As Hong Kong’s first virtual insurer authorized by the Insurance Authority, Bowtie operates purely online and paperless, saving on operational and administrative costs to keep insurance products highly cost-effective.
- 1-on-1 Real Human Customer Service: Many customers worry about losing access to insurance intermediaries when switching from traditional insurers to an online one. However, Bowtie offers dedicated one-on-one customer service, including customer service reps for product and policy inquiries, Product Specialists for advice and consultations, Health Specialists for health check referrals, and Claims Specialists for support with claims. Each team handles their area expertly, so even without intermediaries, you won’t face issues like “orphan policies.”
- No Hard Sell: Bowtie’s customer service team provides objective product recommendations based solely on your needs, without the motivation of sales commissions. That means you can get help without worrying about being pushed into buying extra policies or products.
1-Minute Check: Can You Get Bowtie VHIS Insurance?
Thinking about switching to Bowtie, but unsure if your current health status qualifies for Bowtie VHIS? We’ve compiled the most common results for 26 health conditions to help you do a quick self-underwriting check—it only takes 1 minute to get a preliminary idea of your eligibility!
Press here to conduct Bowtie VHIS preliminary underwriting test
*
- This assessment is for a single health condition only and provides a preliminary result, not a final underwriting decision or guarantee.
- If you have more than one health condition and want to apply for our VHIS plan, we recommend filling out the health questionnaire for a detailed evaluation.
- The final underwriting decision will be based on your complete health declaration.
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