Hong Kong insurance glossary (45 terms, Chinese and English)

The independent statutory body that regulates Hong Kong's insurance industry. It took over supervision of insurers from the Office of the Commissioner of Insurance on 26 June 2017, has licensed and disciplined insurance intermediaries directly since 23 September 2019, and issues guidelines under the Insurance Ordinance (Cap. 41), such as those on the cooling-off period (GL29) and underwriting long term insurance business (GL16).

A company authorised by the IA to carry on insurance business in or from Hong Kong, which must meet capital, solvency and governance requirements. Readers can check a company's name and the classes of business it is authorised for on the IA's Register of Authorized Insurers; the register also lists companies that remain authorised but have stopped writing new business.

An individual or firm licensed by the IA to carry on regulated activities (arranging policies and giving regulated advice), including licensed insurance agencies, individual insurance agents, technical representatives and insurance brokers. Banks registered as licensed insurance agencies also fall into this category. Before buying, check the licence number and principal on the IA's Register of Licensed Insurance Intermediaries.

The class of business under the Insurance Ordinance distinguished from general business, covering longer-term insurance such as life, annuities, linked long term and permanent health. Hong Kong individual participating savings, whole life, universal life and annuity policies are all long term business, and their new office premiums are one of the main indicators in the IA's quarterly provisional statistics.

The class of long term business in which benefits are linked to the value of investment funds or to an index, such as investment-linked assurance schemes (ILAS). A 2025 joint circular from the IA and the HKMA placed indexed universal life (IUL) in Class C, while traditional universal life is generally still regulated under GL16.

The person who owns the contractual rights under a policy and is responsible for paying premiums. The policyholder can exercise rights such as surrendering, taking a policy loan, changing beneficiaries, and switching currency or splitting the policy (where the product allows). The policyholder and the life insured can be the same person or different people; when insuring someone else, the insurer generally requires an insurable interest between them.

The person whose life or health is covered. A life policy pays out when the life insured dies; critical illness and medical policies pay out when the life insured is diagnosed or receives treatment. Some Hong Kong participating savings products offer a change of life insured option, but this requires evidence of insurability and the insurer's approval, and is not a statutory right.

The person who receives the death benefit when the life insured dies, nominated by the policyholder; several beneficiaries can be nominated with set shares. If no beneficiary is nominated, or the beneficiary dies before the life insured, the death benefit may form part of the estate of the life insured or the policyholder and must go through estate administration.

A financial or family interest between the applicant and the life insured, such as oneself, a spouse or a child. The IA's tips on buying insurance note that insuring another person requires an insurable interest; in practice insurers verify the relationship at application, and a policy without an insurable interest may not be issued or may lead to disputes at claim time.

Pure protection life insurance that provides death cover for an agreed term. The IA notes that term life policies have no accumulated cash value when they end and are generally guaranteed renewable up to a specified age. Premiums are usually lower than for whole life with the same sum insured, which suits filling a protection gap during a particular period, such as while repaying a mortgage or raising children.

Life insurance that provides death cover for the whole of the insured's life, usually with a cash value, and may be participating or non-participating. The IA warns that early surrender causes a significant financial loss, with policyholders getting back far less than they paid. Most of what is commonly called "savings insurance" in Hong Kong is participating whole life insurance.

Life insurance that provides death cover for an agreed term and pays a maturity benefit at the end of the term. The IA notes that endowment insurance has a larger savings element than whole life. The maturity benefit can include guaranteed and non-guaranteed parts, and early surrender can likewise return less than the premiums paid.

A policy that provides non-guaranteed benefits to policyholders through bonuses or dividends. "Participating" is a feature rather than a separate product type and can be attached to whole life, endowment or annuity policies. The IA notes that the final payout may be higher or lower than projected in the benefit illustration, and that products with a higher proportion of guaranteed benefits generally offer a higher level of protection.

Life insurance with an account value: premiums are credited to the account after charges, and the account value grows with the non-guaranteed crediting interest declared by the insurer and is reduced by insurance charges. The IA notes that partial withdrawals reduce the death benefit accordingly. In Hong Kong, historical crediting interest rates for at least the past 10 calendar years must be disclosed by product series.

Life insurance whose policy value moves with the performance of investment funds chosen by the policyholder; it is Class C business and the policyholder bears the investment risk. Since 1 January 2015, the minimum death benefit on a Hong Kong ILAS must be 105% of the account value, and extra selling and disclosure requirements apply.

Insurance that pays a lump sum once the life insured is diagnosed with a serious illness listed in the policy, with no restriction on how the money is used. Common terms include a waiting period, a survival period and intervals between multiple claims; illness definitions, payout percentages and early-stage cover vary by product, and the policy terms prevail.

A certification scheme under which the Health Bureau sets minimum standards for individual hospital insurance, fully implemented on 1 April 2019. Certified Plans must guarantee renewal up to age 100, have no lifetime benefit limit, cover unknown pre-existing conditions and carry a 21-day cooling-off period. Premium schedules are published on the VHIS website, and premiums are tax deductible as prescribed.

The two forms of VHIS Certified Plan. Standard Plans have uniform terms and cover, making them easy to compare; Flexi Plans build on the Standard Plan with higher benefit limits or wider cover, usually at a higher premium. As at 31 March 2024, about 97% of VHIS insured persons had bought Flexi Plans.

A deferred annuity certified by the IA whose premiums are tax deductible in Hong Kong. Certification requires total premiums of at least HK$180,000, a premium payment period of at least five years, annuity payments starting at age 50 or later and an annuity period of at least 10 years, with the internal rate of return disclosed. Certification does not mean returns are guaranteed.

An arrangement in which a single premium is paid and regular annuity payments begin straight away, in contrast to a deferred annuity, where premiums are paid first and payments start some years later. A lifetime immediate annuity keeps paying while the annuitant is alive, hedging longevity risk; early surrender conditions are generally strict.

A public lifetime immediate annuity launched in July 2018 by an entity of The Hong Kong Mortgage Corporation Limited. It is open to Hong Kong permanent residents aged 60 or above, paid as a single premium with no medical examination, with a minimum premium of HK$50,000 and guaranteed total payouts of at least 105% of the premium paid; it carries no tax deduction. The maximum premium is as currently published on the official website.

The ratio of non-guaranteed bonuses actually declared by the insurer to the amounts illustrated in the benefit illustration at the point of sale. The IA requires product series with new policies issued since 2010 to disclose it by policy year, with annual, reversionary and terminal bonuses shown separately and updated on the company's website at least once a year; past figures do not indicate the future.

A non-guaranteed dividend declared each year on some participating policies. Once paid it belongs to the policyholder, who can take it in cash, leave it to accumulate with interest or use it to pay premiums. The accumulation rate on dividends left with the insurer is also non-guaranteed and is set, and can be adjusted, by the insurer.

A non-guaranteed bonus that, once declared, is added to the sum insured on some participating policies. Once declared it generally vests in the policy and is paid at face value on death or maturity; on surrender it is paid at its cash value, which is usually below face value and may not be guaranteed, subject to the policy terms.

A non-guaranteed bonus paid as a lump sum only when the policy ends through death, surrender or maturity. The amount can be raised or lowered each year and does not vest in the policy until declared. Terminal bonuses often make up a large share of the long-term value of Hong Kong participating savings policies and are the main source of volatility in fulfilment ratios.

The amount the insurer is contractually guaranteed to pay if the policy is surrendered at a given point, determined by premiums, charges and the cost of protection. On participating policies, the guaranteed cash value in the early years is usually far below the premiums paid, which is the main reason early surrender produces a loss.

The parts of a policy not guaranteed by the contract, including annual dividends, terminal bonuses, interest on dividends left to accumulate and universal life crediting interest. They depend on the insurer's investment, claims, expense and lapse experience. Non-guaranteed figures in a benefit illustration are only illustrative, and actual amounts may be higher or lower.

The document shown to customers at the point of sale projecting a policy's guaranteed and non-guaranteed benefits in different years. In Hong Kong, benefit illustrations for participating policies must comply with the illustration caps and show adverse scenarios. A benefit illustration is not a contractual promise, and the guaranteed and non-guaranteed columns should be read separately.

The cap set by the IA from 1 July 2025 on the customer internal rate of return shown in point-of-sale benefit illustrations for participating policies: 6.0% a year for HKD policies and 6.5% a year for non-HKD policies, applying to all premium payment modes and scenarios. It limits only the illustration and does not directly change the participating fund's actual investment returns.

The crediting interest rates a universal life insurer has declared and credited to accounts in the past. The GL16 interpretation notes require disclosure by product series for at least the past 10 calendar years, weighted by account balance and excluding one-off bonus interest. Historical crediting rates are non-guaranteed past data and do not indicate the future.

A pool of assets an insurer sets up for participating business and manages separately from its other business; bonuses come from its investment, claims, expense and lapse experience. The IA's GL34 requires identification of assets and liabilities, rules for distributing surplus and physical segregation of assets; from 31 March 2026 insurers must also set up a participating business committee and disclose their bonus philosophy.

A levy charged to policyholders on premiums by the IA and collected by insurers on its behalf. Since 1 April 2021 the levy rate has been 0.1% of premiums, capped at HK$100 per policy year for long term policies and HK$5,000 for general policies. If a policy is cancelled within the cooling-off period, the levy paid is refunded.

Money borrowed from the insurer up to the policy's cash value; the loanable percentage and interest rate are set by the insurer and can be adjusted. Outstanding loans and interest are deducted on surrender or claim; if they exceed the loanable amount, the policy may terminate and the amount received may be far less than the premiums paid.

An arrangement under which, if a premium is still unpaid when the grace period ends, the insurer automatically pays it out of the policy's cash value. It is in effect a policy loan and carries interest. If the net cash value is not enough to repay the loan and interest, the policy may terminate or lapse. Whether it is switched on by default depends on the policy terms.

A period after the premium due date during which the premium can still be paid and the policy stays in force; in Hong Kong it is commonly 31 days, subject to the policy terms. A claim arising during the grace period is generally paid after deducting the overdue premium; if the premium is still unpaid at the end of the grace period, an automatic premium loan may apply or the policy may lapse.

The amount the policyholder receives on ending the policy, generally the guaranteed cash value plus the cash value of vested bonuses and terminal bonus, less any outstanding loans and interest. Surrender values on long-term life policies are usually below the premiums paid in the early years.

An arrangement in which a life policy is used as collateral to borrow from a lender, with money drawn monthly or as a lump sum. The Hong Kong programme run by HKMC Insurance has accepted applications since 30 May 2019; monthly payouts are based on the death benefit rather than the cash value, and the loan is repaid from the death benefit when the borrower dies.

An arrangement in which a customer borrows from a bank or other lender to pay life insurance premiums and assigns all or part of the rights under the policy to the lender. Since 1 January 2023 it has been subject to IA supervisory standards requiring an affordability assessment, safeguards against excessive leverage and signing of the IFS-PF; financing does not change the uncertainty of non-guaranteed benefits.

The waiting period is a period after the policy takes effect during which no benefit is paid, commonly 60 to 90 days for critical illness cover. The survival period is the number of days the insured must survive after diagnosis before a benefit is paid, commonly 14 to 30 days. Multiple-claim policies also set intervals between claims. The exact number of days depends on the policy terms.

The period during which the policyholder can cancel the policy unconditionally and recover premiums and levy paid. For Hong Kong life policies it is 21 calendar days from delivery of the policy or issue of the cooling-off notice, whichever is earlier (GL29); investment-linked policies may be subject to a market value adjustment, and VHIS Certified Plans also carry a 21-day cooling-off period.

The process, required by the IA, by which an intermediary establishes a customer's financial position, protection and savings goals, ability to pay premiums and investment preferences before recommending long term insurance. The results should be consistent with the product recommended; incomplete or inaccurate information from the customer may lead to an unsuitable product.

An independent mediation and adjudication body for claims and surrender disputes on personal policies, providing its service free of charge. Complaints must be made within six months of the insurer's final decision, the amount in dispute is capped at HK$1.5 million and the policy must be issued by a member insurer. Non-Hong Kong residents can also complain, and average handling time is about four to six months.

A proposed scheme to compensate policyholders if an insurer becomes insolvent. The 2022 consultation proposed two funds for long term and general business, compensation cap options from HK$1 million to HK$4 million and an initial levy of 0.07%. As at October 2026 the legislation was still being drafted, and Hong Kong has no such scheme covering life policies.

A statement that, since 1 September 2016, customers holding a PRC Resident Identity Card must sign when buying an individual long term policy in Hong Kong, with no option to decline. Its purpose is to remind mainland customers of the factors and risks to consider when taking out a long term policy in Hong Kong; read each item before signing.

The OECD standard for the automatic exchange of financial account information. Hong Kong's Inland Revenue Department lists insurance contracts with a cash value and annuity contracts as within scope; Mainland China has been a reportable jurisdiction for Hong Kong since 1 July 2017, with first exchange in 2018. Whether an account is reported depends on the holder's tax residency, and tax questions need professional advice.