Life Insurance

What is Term Life Insurance?

Term Life Insurance is a type of life insurance. According to the Insurance Authority (IA), Individual Term Life Insurance had yet to dominate the market in 2019, accounting for only around 6% of the entire life insurance market.
Author Bowtie Team
Date 2021-11-03
Updated on 2021-12-13
Who is Term Life Insurance appropriate for?Advantages of Term Life InsuranceHong Kong Term Life Insurance PremiumsHow much life insurance do I need?Term Life VS Whole LifeWhy choose Bowtie Term Life Insurance?Term Life FAQs

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.

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 LifeOther Life Insurance*
Monthly PremiumHK$47

HK$50 – $138.3

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

1-Million Term Life Insurance
Insurance PlanBowtie Term LifeOther Life Insurance*
Monthly PremiumHK$27HK$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 PlanBowtie Term LifeOther Life Insurance*
10-year total premiumHK$5,088HK$6,500.4 – $24,000
Annualized premiumHK$508.8HK$650 – $2,400

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

1-Million Term Life Insurance
Insurance PlanBowtie Term LifeOther Life Insurance*
10-year total premiumHK$3,624HK$5,100 – $24,000
Annualized premiumHK$362.4HK$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

  • The monthly premiums above are for reference only. The actual premiums are based on a number of factors including time, inflation, insurance authority levies and other factors.

Which factors affect your insurance premiums?

The premium structure for Term Life Insurance is generally straightforward. Most companies consider the following 3 factors when determining standard premium rates: age, gender, and smoking habits. Some insurers provide options to pay annually or monthly; once in a while, companies also offer first-year premium discounts. These factors can all affect your insurance premiums. 

It is worth noting that insurers also calculate the level of risk through underwriting. Upon discovering factors that may result in a higher risk of mortality, such as suicidal inclinations, depression, or vascular diseases, an additional cost (loading) may be built into the insurance policy.

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 familyBeneficiaries
Long-term debt (e.g. mortgage)Spouse or child
Education expensesChild
Living expensesSpouse or child
Dependent care expensesRetired 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.

Term Life VS Whole Life

Term LifeWhole Life
Benefit TermUsually available in 5-, 10-, and 20-year terms

When the policy expires, it typically allows you to renew until you reach a specified age.

Lifelong coverage (or until the insured person turns 100)
PremiumApproximately HK$42 – $2001Costs 28% more than term life2
Death BenefitYesYes
Cash ValueNoYes
Premium StructureLevel-premium/ yearly-renewableLevel-premium/ limited-payment
Brief NoteAlthough term life insurance does not have a cash value, the majority of the policy’s premiums go towards life insurance coverage, rendering it a cost-effective option.A whole life policy has a savings component that can build cash value over the years, but it costs more than term life insurance. If you decide to give up or surrender, your policy, you may incur losses. Nevertheless, as long as you’re able to keep up with the premiums, it is a legitimate option.
  • 1Sample rates are for a policy with $1 million in coverage for a 35-year-old female non-smoker; term life: the average standard premium, as of 1 July 2020, for term life insurance (20-year term) on the market (including digital term life insurance and 8 other term life insurance plans); cash-value life: the average premium, as of 1 July 2020, for 8 cash-value life insurance (20-year term) on the market.
  • 2In 20 years, the total premium cost for Bowtie Life Insurance would be lower than the total average premium cost for other term life insurance (20-year term) on the market by 28%; sample rates are for a policy with $1 million in coverage for a 35-year-old female non-smoker; data is derived from the average standard premium, as of 1 July 2020, for term life insurance (20-year term) on the market (including digital term life insurance and 8 other term life insurance plans).

Whole life insurance provides lifelong coverage, but its monthly premium is higher than that of term life insurance. Only a small portion of the premium contributes to life protection; the majority goes towards commissions, investment management expenses, investment principal, etc. (most insurers provide guaranteed and non-guaranteed benefits, which are generated from investments).

If you wish to acquire low-cost and stable returns, besides purchasing whole life insurance, you may consider investing in low-risk investment options through brokerage-free securities trading platforms.

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 85.
  • 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.
  • 3 Based on average rates for an 18-year-old female nonsmoker

Term Life FAQs

1. How do I choose the best Term Life Insurance?

Term Life Insurance is pretty straightforward: typically, if the policy is in force at the time of death, your beneficiary receives the death benefit. 

Therefore, when comparing different products, you may first consider the difference in premiums. Quite a few insurers provide first-year premium discounts. However, since life insurance tends to cover a considerable period of time, the pre-discount premium serves as a better indicator of your actual cost.  

Purchasing life insurance is a big decision. Apart from the prestige of an insurance company, one should also consider the following when making a decision:

  • Territorial Limits: For instance, if you’re planning to emigrate to Canada, an insurance policy that only provides coverage to the insured within Hong Kong would be inappropriate for you.     
  • Exclusions: Exclusions are unique to each particular policy. For example, some insurance policies on the market clearly state that in case the policyholder commits suicide within 1 year from the date of revival of the policy, the claims are not payable by the insurer. In addition, based on the insured’s health conditions, new exclusions might be added to the policy. You are encouraged to choose a life insurance policy that best caters to your specific needs.
2. Is life insurance payment impacted by the cause of death?

There are only two possible outcomes for the term life insurance claim: the insurer either pays the claim in full or denies the claim in its entirety. As long as the cause of death is not excluded from the life policy, most insurers pay out the full proceeds at the death of the insured. Assuming that no further exclusions apply, the only reason that insurers might deny a claim is when the policyholder commits suicide shortly (typically within 1 year) after the policy is in force.

In fact, suicide is a common exclusion. But each insurer follows a different set of standards and definitions.  To get a better grasp of your insurance policy, read it with care. The Bowtie Life Insurance policy explicitly states:

If the insured commits suicide within 1 year from the date of commencement, whether sane or insane at that time, the policy will be void and no claim will be payable.”

3. How do I buy Term Life Insurance

Term life insurance is straightforward. Many insurers have introduced digital insurance platforms that consolidate underwriting, payment, and policy authorization, letting clients purchase policies online within minutes. What’s more, with better access to insurance information, consumers can compare different platforms, banks, traditional agents, and brokers against each other. 

4. How to Claim a Life Insurance Policy

In general, to claim a life insurance benefit, the beneficiary has only to file a death claim with the insurance company by submitting a certified copy of the death certificate. Different insurance companies may differ in their claims process (“Claims Process”). Contact your insurance company for information on their claims process.

  • Any information related to Bowtie products in this article is only for reference and educational purposes. Customers should visit the related product page for detailed terms and conditions.

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