Utilising Term Life to Hedge an Average of HK$1.9 Million Protection Gap Amongst Hongkongers

It is often wise to plan for the worst and prepare for the best in all matters. When people plan for their future, they often consider the possibility of an untimely death as the family breadwinner. They worry that if this unfortunate event happens, their family will face enormous financial pressure, and their standard of living will drop sharply. According to a study by the Insurance Authority, the mortality protection gap for each employed person in Hong Kong has reached HK$1.9 million, or 5.7 times the average annual salary as of 2019. In regard to this problem, one solution  is to purchase life insurance to obtain enhanced protection.

Life insurance helps bridging the protection gap
To calculate the risk of premature death and prepare for it, one needs to understand the concept of "mortality protection gap."

The calculation method for the mortality protection gap is to deduct available assets from the amount needed to support the family's standard of living. The family's needs include future medical expenses for dependents, education expenses for children, household expenses, and household debt. Available assets include savings, investments, and retirement-related assets, among others.

Mortality Protection Gap = Family Needs - Available Assets

According to the Mortality Protection Gap Study 2021 conducted by the Insurance Authority in 2021, the overall mortality protection gap for premature death in Hong Kong was around HK$6.9 trillion in 2019. When calculated per employed person, it was HK$1.9 million, or 5.7 times the average annual salary. This indicates the fact that many Hong Kong residents have significant mortality protection gaps.

One way to quickly fill this gap is to purchase life insurance, which can provide compensation in case of the policyholder's premature death and ensure that their family can temporarily cover their living expenses without significant financial impact.

Therefore, to ensure adequate protection for oneself and their family, it is essential to regularly review insurance policies based on their needs and financial ability and obtain appropriate life insurance coverage.

Policyholders can also consider term life insurance, which offers higher protection benefits, and allows the insured to invest the saved premiums to achieve "Buy Term, Invest the Rest."

Maximize life protection with term life insurance
When choosing life insurance, it is important to understand that it can be divided into two types: savings and term life insurance.

Savings insurance, as the name suggests, has a savings component and is a conservative financial tool that can accumulate wealth and provide life insurance coverage. Insurance companies will invest the premiums they receive in different assets to earn returns after deducting commissions and administrative expenses.

On the other hand, term life insurance has no savings component, and all premiums received by the insurance company will be used to provide life insurance coverage, providing higher leverage protection for the insured.

Compared to savings life insurance, term life insurance premiums are much more affordable and can be solely focused on providing coverage, maximizing the protection benefits of life insurance. Policyholders can invest the saved premiums on their own, and the accumulated returns can match or even exceed those of savings life insurance.

For example, the guaranteed return rate for savings life insurance ranges from 0.55% to 3.2%[1]. Even when comparing with the relatively conservative investment option of regular savings, the interest rate has already reached 2.4% to 3.5%[2].

Bowtie provides truly pure protection to help you "Buy Term, Invest the Rest"
Bowtie has always strived  to fill the serious protection gap in Hong Kong by providing simple and affordable pure protection insurance products for most people, with the aim of using most of the insured's premium for protection.

For example, with Bowtie's term life insurance, a 30-year-old non-smoking male only needs to pay HK$38 per month to enjoy life insurance coverage of up to HK$1 million. The coverage is 40 times higher than that of a regular savings life insurance policy with the same price[3], which shows that Bowtie's term life insurance can provide more life protection and benefits.

In May 2022, Bowtie, which has only been established for 3 years, achieved an outstanding performance of accumulating more than 10,000 voluntary medical insurance customers, with a total coverage amount of over HK$40 billion, providing protection for more than 60,000 Hong Kong people. The proportion of the online sales market has also shown multiple growth, and there is no sign of slowing down or regressing.

In addition to term life insurance, Bowtie currently provides VHIScritical illness insuranceaccident insurancecancer insurance, and group medical insurance, all of which are "Zero Commission" term insurance plans, aiming to use most of the insured's premium for protection, and make true protection easily accessible.


[1] Taken from the information published by the Consumer Council in 2016, which only calculated insurance plans that offer guaranteed maturity returns, guaranteed annual returns, or guaranteed return rates.

[2] Taken from data generated by Money Hero as of April 9, 2023, and calculated using the fixed deposit interest rates for a deposit of HK$100,000.

[3] Calculated based on the standard premium for a non-smoking 35-year-old female for a coverage amount of HK$1 million. For term life insurance, the data is the average standard premium (including online term life insurance and eight other term life insurance policies) in the market as of July 1, 2020, for a 20-year coverage period. For savings-type life insurance, the data is the average premium in the market as of July 1, 2020, for eight savings-type life insurance policies with a 20-year premium payment period.