【Immigration Insurance 2022】How to handle medical, critical illness, and savings insurance? Should you cancel or retain the policy?

In recent years, many Hong Kong residents have considered emigration. Apart from selling properties, they also need to manage their existing life insurance, critical illness, savings, and medical insurance policies. If one eventually relocates to places like the UK, Canada, Australia, or Taiwan, what should be taken into account? Is it necessary to cancel the policies, or should they be retained?

In theory, the coverage of life insurance should not be restricted by location. If the insured unfortunately passes away during the policy period, whether in Hong Kong or in another country or region, the beneficiary should receive compensation. However, some term life insurance policies stipulate that the insured must notify the insurance company if there are changes in their place of residence, citizenship, or tax status. If a change in the insured’s residence results in a change in risk, additional premiums may be charged, or the policy may not be renewed. On the other hand, while death benefits in Hong Kong are not subject to tax, it is important to note that in many countries, if the policy does not specify a beneficiary, the death benefit may be considered part of the estate and could be subject to estate tax. Conversely, if the policy designates an individual as the beneficiary, estate tax may be exempted. As tax arrangements vary across countries, it is advisable to consult an immigration advisor for detailed information before emigrating.

When preparing for emigration, Hong Kong residents often require substantial funds and may consider the cash value accumulated in their long-term savings insurance as a means to obtain cash through policy surrender. However, surrendering a policy early may result in a cash value significantly lower than the premiums paid, leading to substantial losses. Some policyholders whose savings insurance premiums are not yet fully paid may consider stopping contributions since they are leaving Hong Kong, especially as early surrender would incur significant losses. However, ceasing payments could trigger a policy loan, requiring the policyholder to pay interest to the insurance company or even leading to policy termination. In fact, policyholders may explore the feasibility of reducing the coverage amount to stop future premium payments while keeping the policy active, and they should consult their advisor beforehand. On another note, if policyholders continue to hold savings insurance and earn bonuses, they should be mindful of whether such income is taxable. In Hong Kong, capital gains and interest income are not subject to tax, but in other countries, such income may be taxable. Tax systems in many countries are more complex than in Hong Kong, so it is advisable to consult a tax advisor in advance to avoid unintentional tax evasion.

Critical Illness Insurance is generally recognised worldwide. As long as the diagnosis meets the policy’s defined conditions and terms, policyholders can receive compensation for critical illness regardless of whether they are travelling or have immigrated to another country. If the insured is diagnosed with a critical illness by a doctor registered overseas, they may submit a claim application within the claim period specified by the insurance company and provide the necessary supporting documents as per the policy terms. However, upon completion of the claim process, the insurance company may only deposit the compensation into a Hong Kong bank account rather than an overseas account, necessitating a wire transfer. Similar to life insurance terms, if the insured changes their place of residence, the insurance company may adjust the critical illness premium based on the risk level associated with the insured. However, it is important to remember that if you have been paying for critical illness insurance for some time, you should not discontinue the policy abruptly, as this could lead to the risk of re-underwriting, resulting in higher premiums or additional exclusions.

Local medical insurance in Hong Kong primarily provides medical coverage for residents, although some policies allow policyholders to claim medical expenses incurred overseas. However, it is important to pay attention to the terms and restrictions of different medical insurance policies. In Hong Kong, most high-end medical insurance plans come with geographical restrictions, such as coverage in Asia, worldwide (excluding the US), or worldwide (including the US), depending on the insured region selected at the time of application. Crucially, if the policyholder’s place of residence changes and they stay overseas beyond a specified duration, even if the relocation area falls within the covered region, the coverage amount may be reduced, or the policy may not be renewable. Therefore, after emigration, individuals may likely need to purchase local medical insurance in their new country to align with the local healthcare system.

Note: This article was last updated on 5th July 2022.

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.