Life Insurance

A Complete Guide to Whole Life Insurance 2022

Among most life insurance products, whole life insurance attracts people by its "investment and coverage" package. However, can it be used as an investment tool? Why would life insurance pay dividends? How is its premium different from other life insurance? Let Bowtie walk you through a step-by-step guide to understand whole life insurance!
Author Bowtie Team
Date 2021-11-10
Updated on 2022-02-08
​​What is whole life insurance?How does whole life insurance work?The premium of whole life insurancePros and cons of whole life insuranceWho would consider whole life insurance?If I want to buy life insurance, are there other choices?Difference between term life and whole life insuranceWhy choosing Bowtie Term Life Insurance?

​​What is whole life insurance?

Whole life insurance provides both life insurance coverage and returns. A portion of the premium goes towards investment. Insured can cash back at any time or save the profit in the policy for the accumulated profit. In addition, the insured/ beneficiaries could claim in a lump sum until the insured dies/ termination of policy/ after the coverage period (assuming the insured turns 100).

The premium payment period of whole life insurance varies in different plans. It could be from 10 years to 30 years, or even longer. The premium is fixed during the payment period. After that, the insurers do not need to pay an extra premium. And, the plan would stay effective to provide lifelong insurance protection and long-term potential investment revenue to the insured.

How does whole life insurance work?

Most people consider whole life insurance an investment tool, mainly because the policy would provide death compensation to the beneficiaries and constantly accumulate cash value.

Whole life insurance would assign a portion of the premium to different investment projects. The profit would generate a more significant return by time and compound interest effect. Therefore cash value will grow sustainably, similar to the principle of long-term investment.

The cash value calculation could be complicated, depending on the actuary’s calculation and insurance companies’ investment portfolio. But, simply speaking, after deducting commission, guaranteed cost and operating expenses of premium payment in each period, and adding return interest generated by the insurance company investing in the remaining premium, the Insured can withdraw the final dividends at any time.

The premium of whole life insurance

Different to term life insurance, whole life insurance has a fixed payment period. During the period, the premium would not change once it is determined.

Since whole life insurance has a fixed premium within several decades, the premium is higher than term life insurance. Assuming that the insured is a 35-year-old male non-smoker, below is his premium comparing term life insurance and whole life insurance.

Death BenefitAverage yearly premium
Bowtie Term Life Insurance (renew yearly)2 millionAround HK$1,280
Term Life Insurance (10 years coverage period)2 millionAround HK$2,540
Whole Life Insurance (10 years payment period)2 millionAround HK$69,000

Pros and cons of whole life insurance


The attractiveness of whole life insurance:

  • The premium would remain unchanged during the payment period. As a result, the insured does not need to worry about any increase in premiums or additional costs due to getting older or worsening health conditions.
  • In addition, whole life insurance has an investment portion. The insurance company would invest for the insured, and the profit gained would turn into accumulated profit on a yearly basis. Therefore, buying whole life insurance seems to be a long-term investment strategy for most insureds.


  • Once you have applied for whole life insurance, you need to keep contributing until the payment period ends. If you wish to terminate the policy earlier, you cannot get the guaranteed return or dividend if the surrender value is lower than the paid premium. It could cause a loss and lower the flexibility of capital movement.
  • Besides, the premium is relatively high as whole life insurance involves both investment and coverage. The sum insured is relatively lower than term life insurance under the same premium. Therefore, it might not be the best option for those who are seeking more coverage.

Who would consider whole life insurance?

If you have the following conditions, you can consider whole life insurance:

  1. You can afford a higher premium and would not terminate the contract before the payment period ends
  2. You would like to withdraw money irregularly from your insurance account
  3. You are not familiar with investment and looking for a stable return
  4. You are seeking a stable premium instead of a yearly increasing premium

However, if you are looking for a low cost and steady return, instead of whole life insurance, you can also consider investing in a low-risk investment product in a no-commission securities investment platform.

If I want to buy life insurance, are there other choices?

Term life insurance is a good option for those who want full coverage for their family.

Compared to whole life insurance, term life insurance offers an affordable premium as most of the premium is used for coverage purposes. Therefore, with the same premium, the insured can get higher coverage.

According to the survey, under the same amount of premium, 

  • Term life insurance offers 12x sum insured^ compared to whole life insurance
  • Bowtie offers a 40x sum insured compared to general endowment plan products in the market.
  • ^ Sample rates are for a policy with HK$1 million coverage for a 35-year-old female non-smoker.
  • Term life: the average standard premium for term life insurance (20-year term) on the market (including online term life insurance and 8 other term life insurance plans), as of 1 July 2020.
  • Endowment plan: the average premium for 8 endowment plan (20-year term) on the market, as of 1 July 2020.

Difference between term life and whole life insurance

Insured could choose the most suitable life insurance product depending on their needs and affordability:

Term life insuranceWhole life insurance
PremiumMore affordable, premium adjusted yearlyHigher, fixed premium 
Sum insuredHigherLower sum insured under the same premium
Coverage periodRequired to renew regularlyLife long guarantee (or turns age 100)
Saving componentNo saving component or cash valueWith cash value and non-guaranteed dividends
Recommended applicants
  • Low-income groups, fresh graduates
  • With financial burden, e.g. mortgage loans
  • With limited cash flow
  • Stable income 
  • Look for dividends return 
  • Wants a longer coverage period

Why choosing Bowtie Term Life Insurance?

As the first virtual insurance company, Bowtie simplifies the application process – the insured only needs to answer 3 simple questions for the underwriting process. With the administrative costs saved, we could provide lower premiums with the same sum insured and benefits. For a policy with HK$1 million sum insured, the monthly premium can be as low as HK$24^. 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.

Besides, Bowtie term life insurance is a pure coverage product. There is no fixed payment period and you can terminate the policy without any loss. You can adjust your protection coverage depending on different life stages and enjoy more flexibility.

  • ^Based on average standard rates for an 18-year-old female nonsmoker


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