【Immigration Insurance 2022】How should medical, critical illness and savings insurance be handled? Cut or retain the policies?

In recent years, many Hong Kong people have considered emigrating. In addition to selling their property, they also need to deal with their existing life insurance, critical illness insurance, savings and medical insurance. If they ultimately move to the UK, Canada, Australia, Taiwan or elsewhere, what should they be aware of? Do they need to cancel their policies, or should they retain them?

In theory, life insurance cover should not be subject to geographical restrictions. If the insured dies during the policy term, the beneficiary should receive the death benefit regardless of whether the death occurs in Hong Kong or another country or region. However, the terms of some term life insurance policies stipulate that the insurance company must be notified if the insured's place of residence, citizenship or tax status changes. If a change in the insured's place of residence results in a change in risk, the insurer may charge an additional premium or decide not to renew the policy. On the other hand, although death benefits are not subject to tax in Hong Kong, it is important to note that in many countries, if no beneficiary is designated in the policy, the death benefit may become part of the estate and may therefore be subject to inheritance tax. Conversely, when an individual is expressly named as the beneficiary, the inheritance tax may be exempted. As tax arrangements vary between countries, you should consult an immigration adviser in detail before emigrating.

Hong Kong people generally need substantial funds when preparing to emigrate. They may therefore think of obtaining cash by surrendering their long-term savings insurance, which usually has a cash value. However, if a policy is surrendered early, its cash value may be significantly lower than the premiums paid, resulting in substantial losses. Some policyholders may not yet have finished paying the premiums on their savings insurance. Since they are leaving Hong Kong and would incur significant losses from early surrender, they may consider stopping premium payments instead. However, this may trigger a policy loan, requiring the policyholder to pay interest to the insurer, and could even result in the policy lapsing. In fact, policyholders may explore the possibility of reducing the sum assured so that they can stop paying future premiums while keeping the policy in force. They should consult their adviser beforehand. That said, if you continue to hold savings insurance and receive bonuses, you should check whether this income is taxable. In Hong Kong, capital gains and interest income are not taxable, but capital gains or interest income may be taxable in other countries. The tax systems of many countries are more complex than Hong Kong’s, so you should consult a tax adviser in advance to avoid inadvertently evading tax.

Critical illness insurance is generally valid worldwide. As long as you are diagnosed with an illness that meets the policy definition and terms and conditions, you can receive a critical illness insurance payout whether you are travelling or emigrating to another country. If the insured is diagnosed with a critical illness by an overseas-registered doctor, they may submit a claim within the claim period specified by the insurance company and provide supporting documents in accordance with the policy terms and conditions. However, after completing the claims process, the insurance company may only deposit the payout into a Hong Kong bank account rather than an overseas bank account, in which case a telegraphic transfer will be required. Similar to life insurance terms and conditions, after a change of residence, the insurance company may require an increase in critical illness premiums based on the risks borne by the insured. However, remember that if you have been paying for critical illness insurance for some time, you should not cancel the policy hastily; otherwise, you may face the risk of undergoing underwriting again, resulting in higher premiums or additional exclusions.

Local medical insurance mainly provides medical protection for customers residing in Hong Kong. Although some medical insurance policies allow insured persons to claim medical expenses incurred overseas, it is important to note the terms and restrictions of different medical insurance policies. In Hong Kong, most high-end medical insurance policies have geographical restrictions, such as Asia, worldwide (excluding the USA), or worldwide (including the USA), depending on the geographical area of cover selected by the customer when taking out the policy. Most importantly, if the insured person’s usual place of residence changes and they stay overseas for longer than the specified period, even if the country or region to which they have moved falls within the geographical area of cover, the relevant sum insured may be reduced, or the policy may no longer be renewable. Therefore, after emigrating, you may also need to take out medical insurance locally to complement the local healthcare system.

Note: This article was last updated on 5 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.