Considerations and Options for Endowment Insurance Plans in Hong Kong
There are so many ways an endowment plan can help improve your financial position. In Hong Kong, an endowment policy is usually viewed as an opportunity to save money with an added benefit. It is usually partnered with a life insurance policy.
It becomes a low-risk investment for policyholders because it can be withdrawn once the policy reaches maturity.
Since this is considered to be a low-risk investment, you should not expect that it will give you high returns. However, you can be assured that the returns will be guaranteed and definitely higher compared to a traditional savings account.
Some people use an endowment plan to save up for something in the future. For instance, parents can use it to save up for a college fund for their children. Instead of getting an education loan to finance their college studies, you can save up for this through an endowment policy.
You can place it under the name of your child so they can manage it once the maturity date passes. If you want, you can bundle it with a life insurance policy. That way, if something happens to your child, you can get claims out of the policy.
You can also choose to use this as a retirement saving plan – although the returns might not be as great as your other options. Bottom line is, you can use this to diversify your investments.
Important considerations about an endowment plan in Hong Kong
In an article published in Now Compare, an endowment insurance is a plan that will provide you with payment at the end of a specified term. This payment is usually higher than what was initially invested or paid in the combined premiums.
Since it is categorised as an insurance, you can also get claims upon the death of the policyholder. Either way, this is a great backup plan because you get a life insurance that will provide for your family in the event of your untimely death.
At the same time, if you survive the maturity date, you can get your money with profit – thanks to the interest that it will gain over the years.
An endowment plan is usually available in various terms (2, 3, 5, 10 or 20 years). The longer the term, the higher returns you can get. If you get a 10-year endowment insurance, you will be paid after you reach the 10-year mark (maturity date) or upon an early death.
Your premiums are usually paid in instalments – but mostly on a yearly basis. For instance, a 5-year term will require you to pay 5 premiums. If you have a lump sum money available, you can opt to pay a single premium and leave it there until the maturity date.
For the pay-out, some insurance companies will give you a higher claim if you survive the maturity of the endowment plan. However, this will depend on the market situation at that point.
Through Consumer.org, the Consumer Council wants to remind Hong Kongers that an endowment plan’s payout may be lower-than-expected. This is especially true if it is reliant on a foreign currency – which is the usual practice in Hong Kong.
The council advises policyholders to avoid focusing on the returns because if they reach the maturity date when the currency is in trouble, then losses might be possible. This is why it is very important that you come up with a strategy if you want to get an endowment plan.
For instance, if you want to use this to diversify your portfolio, it is advised that you bundle it with a life insurance. That way, you get the best of two policies. You can get protection in the event of an untimely death and you will also enjoy a payout when you survive the maturity date.
Options to get an endowment plan in Hong Kong
The Consumer Council, when they studied various insurance companies offering endowment, noticed that what each company offered is quite diverse. Some offered life insurance, while there are those who offered a guaranteed payout. They advised Hongkongers to make sure that they compare the plans so it will meet their specific requirements.
To help you decide, here are the various endowment plans that some insurance companies offer:
Hong Kong Life Insurance Limited
This company offers an endowment plan (RMB policy) with two settlement options. You can choose to have it in either RMB or HKD. Their policy requires premium payments for 2 years with a life protection of up to 6 years. If calculated in RMB, the policy guarantees a return of 117.4% of the premium paid.
That means if you paid a total of RMB100,000, you will enjoy as much as RMB17,000 worth of growth on that plan. Apart from that, if you meet an early death, you can get a free accidental benefit that can go as high as RMB400,000.
Citibank Hong Kong
Citibank offers the AXA Yuan RMB Endowment Plan III. This is a 5-year endowment plan that requires 2 years worth of premium payments. You can choose to prepay the 2nd year premium to take advantage of the 3.46% interest growth.
The policy guarantees that you will get a payout after the policy matures – up to 111.9%. This plan also offers life protection that can be equal or higher than 101% of the premium paid. The earlier the death, the less your beneficiaries will receive from your life protection benefit.
HSBC
HSBC also offers the Target Protection Plus. It is also a combination of a life insurance and an endowment plan. HSBC Life (International) Limited underwrites the policy. It has a term of 10 years with guaranteed cash bonus amounting to 10% of the insured sum after maturity.
The great thing about this policy is it allows you to cash out or reinvest your annual dividends to boost the savings potential of the plan. You also have the option to pay the premiums annually for 5 years or make a single lump sum payment.
You can also add other coverages like claims for permanent disability, accidental death and dismemberment, female diseases, etc.
There are only some insurance companies that you can look into if you are serious about investing in an endowment plan.
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