[Hong Kong’s first protection-focused ILAS] HSBC Wealth Select Insurance Plan: 7 key features of a protection-focused investment-linked life insurance policy

In recent years, the Insurance Authority has introduced a brand-new type of investment-linked life insurance with high life protection, namely Protection Linked Plans ("PLPs"). Compared with some other investment-linked life insurance products, for example those where a specified percentage of the policy value is paid as the benefit amount, commonly 105%, Protection Linked Plans offer a higher death benefit component, and the plans themselves have a simple and transparent fee structure, in order to meet customers’ protection and retirement planning needs at different stages of life.

Among them, HSBC Life was the first to launch the market-leading Wealth Promoter Protection Linked Insurance Plan (shortened to HSBC Wealth Promoter). This product has seven key features:

Policyholders of HSBC Surplus can choose a death benefit amount equivalent to 150%, 200% or 250% of the Total Premiums Payable¹ on or before the insured person reaches age 65³. For example, if the policyholder chooses 150% of the Total Premiums Payable¹ as the death benefit, and the insured person passes away on or before age 65³, the death benefit will be the higher of 150% of the Total Premiums Payable¹ or 105% of the account value. If the insured person dies after the policy year in which they reach age 65, the death benefit may be significantly reduced to the minimum death benefit, namely the higher of 100% of the Total Premiums Payable or 105% of the account value, which may mean the death benefit payable is insufficient to meet your personal needs.

Please note that the death benefit provided by HSBC Surplus is subject to an insurance charge, which will be deducted together with any outstanding unpaid fees and charges (if applicable) at the time of payment. The insurance charge for providing insurance protection will be deducted from your investment-linked life insurance policy. This charge may increase substantially as the insured person gets older or if your investments incur losses. In addition, this plan does not offer any premium holiday. If the due premium remains unpaid after the grace period, the policy will automatically lapse, and the policyholder can only receive the surrender value of the policy (if any). 

If, according to different life stages, you wish to increase or reduce the sum insured⁴ — for example, if the original sum insured chosen is 150% of the Total Premiums Payable and you later wish to increase it to 250% — you may adjust it as needed at any time after the first policy anniversary and on or before the insured person reaches age 65³. Of course, the monthly insurance charge will also increase. Increasing the sum insured may be subject to underwriting, whereas reducing the sum insured does not require underwriting⁴. 

At the same time, HSBC Surplus offers the “Guaranteed Protection Benefit”, meaning that when the account value is insufficient to pay the applicable fees and charges, and if the policy meets specific conditions (please refer to Note 5 for details), the policy may remain in force. If the insured person dies on or before age 65³, the beneficiary may claim 150% / 200% / 250% of the Total Premiums Payable¹ (depending on the policyholder’s choice) as the death benefit. 

For example, Jason (a pseudonym), aged 45, is both the policyholder and the insured person. His annual premium is HK$30,000, the premium payment term is 5 years, and the total premium is HK$150,000. He chooses a sum insured of 200% of the Total Premiums Payable (i.e. HK$300,000). Even if poor market performance causes the account value to decrease so that it is insufficient to pay the applicable fees and charges, or even if the account value falls to zero, provided that certain conditions are met⁵, the death benefit payable if Jason dies on or before age 65³ can remain at no less than HK$300,000. If Jason dies after age 65, the minimum death benefit² will be at least 100% of the Total Premiums Payable or 105% of the account value, whichever is higher.

HSBC Wealth Select’s charges are very simple and clear. There are two types of ongoing fees and charges: the first is the insurance charge⁶; the other is the policy administration charge. Both fees and charges are payable on each policy monthly anniversary until the policy is terminated. In addition to the two ongoing charges above, the underlying funds of the investment options may impose separate fees and charges, which will be deducted from, and reflected in, the relevant fund unit price. In addition, if the policyholder makes a partial withdrawal on or before the 9th policy year, or if the policy lapses or is surrendered, an early redemption charge may apply (the charge may be as high as 30% of the account value, applicable for up to 9 years, depending on the premium payment term). Please refer to Part B of the product brochure, “Summary of Fees and Charges”, for details.

Policyholders all hope to “have a choice”. HSBC Embrace (USD Policy) offers more than 60 investment choices, with each investment choice linked to an SFC-authorised fund. These cover a range of fund houses, regions and sectors, such as US equity funds, Hong Kong equity funds, technology funds, environmental, social and governance (ESG) funds, and more, enabling investors to build a diversified investment portfolio⁷.

It is worth noting that HSBC Embrace also offers income-distributing investment choices, meaning that the investment choices may distribute cash dividends on a regular basis. Of course, dividend distributions, distribution frequency, and the amount or rate of dividends are not guaranteed. Dividends may be paid out of capital, and a positive dividend rate does not represent a positive return. Please refer to Important Note 11 for details.

As market conditions are ever-changing, HSBC Exquisite offers policyholders the flexibility to switch investment choices and change premium allocations to different investment choices at any time by completing the “Investment Choice Arrangement Application” form via the online policy service on HSBC Personal Internet Banking (where applicable) or through your intermediary.

If you wish to prepare early for retirement, you can choose HSBC Wealth Premier’s “Risk Profile Matching and De-risking Service” at your discretion. Based on the risk profiling questionnaire, HSBC Life will determine the HSBC risk level⁸ that matches your investment risk appetite and match it to the designated investment choice according to the policy currency. When the policyholder reaches the age of 55³ or above, and subject to specific conditions⁹, HSBC Life will automatically switch and change the premium allocation arrangement to another designated investment choice with a lower risk level. Please refer to the investment choices brochure in the sales documents for details.

If investors wish to make a partial withdrawal of the account value, they may do so at any time, subject to the remaining account value balance and withdrawal limits, and this will also affect the death benefit value; an early surrender charge⁴ will be applied for withdrawals made too early. It is worth noting that if partial withdrawals are made within 12 months before the life insured’s date of death, the sum insured and the minimum death benefit will be affected immediately. At the same time, the guaranteed protection benefit will also lapse after any partial withdrawal. HSBC Goal Wealth is designed for long-term holding; if partial withdrawals are made during or before the first nine policy years, an early surrender charge of up to 30% of the partial withdrawal amount will apply. For details, please refer to Part B of the product leaflet, “Summary of Fees and Charges”. 

HSBC Vita Policyholders will be entitled to a long-term customer bonus after the end of the 5th Policy Year, which will be paid in the form of Fund Units. Thereafter, it will be paid on the last day of each Policy Year. Please refer to Part A of the product brochure, “Long-term Customer Bonus”, for details. Once paid, the long-term customer bonus will form part of the Account Value, and will therefore also be subject to the Policy Administration Charge, Insurance Charge and Early Withdrawal Charge.

Please note in particular that the bonus rate under Part A of the product brochure, “Long-term Customer Bonus”, does not represent the rate of return or the Policyholder’s investment performance. If the Policyholder makes a partial withdrawal which reduces the Account Value, the amount of long-term customer bonus under the Policy (if any) will also be reduced accordingly. The long-term customer bonus is subject to the terms and conditions. Please refer to the product brochure for details.

Finally, HSBC Wealth Select offers flexible investment and protection options to meet the needs of different stages of life. If consumers are interested in HSBC Wealth Select, they may visit the HSBC website, or contact their relationship manager, or speak directly to staff at a branch to assess whether the product is suitable for them.

Notes:

1. “Total premiums payable” means, for the purposes of calculating death benefit and insurance charges, the total amount of premiums that the policyholder commits to paying for this plan during the premium payment term selected at policy inception, excluding top-up premiums.
2. “Minimum death benefit” means the death benefit payable to the beneficiary, which is at least 100% of the total premiums payable. If a partial withdrawal is made within 12 months before the insured person’s date of death, the minimum death benefit will be affected immediately.
3. Age means the next birthday age of the insured person or policyholder (where applicable) on the policy effective date or policy anniversary. Such age will remain unchanged throughout the corresponding policy year until the next policy anniversary.
4. Monthly insurance charges may increase/decrease respectively as the sum insured increases/decreases, thereby affecting the policy value. The death benefit may also be reduced as the sum insured decreases, meaning that the death benefit received by the insured person may not be sufficient to meet personal needs. For details of policy fees and charges calculations, please refer to the “Policy fees and charges calculation example” under “Summary of fees and charges” in Part B of the “Product Brochure”. The policyholder may change the sum insured when the insured person is aged 65 or below; for details, please refer to the “Change of sum insured” section in the policy provisions.
5. The policy will remain in force as long as all of the following conditions are met: (i) all premiums are paid on or before the premium due date; (ii) no partial withdrawal has been made from the policy; (iii) the policy has never lapsed at any time since inception; and (iv) policy reinstatement has not been exercised. The guaranteed protection benefit will end immediately on the policy anniversary immediately following the insured person’s 65th birthday, or on the date when any of the above conditions is no longer met, whichever is earlier. For details, please refer to the policy provisions.
6. The insurance charges used to pay for insurance coverage will be deducted from your investment-linked life insurance policy. This charge may increase substantially as the insured person gets older or when your investments incur losses.
7. SFC authorisation is not a recommendation or endorsement of the scheme, nor does it guarantee the commercial merits or performance of the scheme. It does not mean the scheme is suitable for all investors, nor does it endorse the scheme as suitable for any particular investor or class of investors.
8. The underlying funds corresponding to the designated investment choices are subject to the expected volatility ranges, mapped to quantitative risk thresholds for the 5 HSBC risk ratings (1. Low risk, 2. Low to medium risk, 3. Medium risk, 4. Medium to high risk, 5. High risk). The HSBC risk rating of each designated investment choice refers to the HSBC risk rating of the underlying fund. The risk ratings of the underlying funds are reviewed regularly by the HSBC Group and may be redefined from time to time. Therefore, the fund managers of the underlying funds will regularly review and update the asset allocation strategies to ensure the expected volatility ranges remain within the quantitative risk thresholds.
9. The specified conditions include: (i) the risk profiling and risk reduction service has been selected; and (ii) the risk tolerance questionnaire has not been updated within 12 months before the next policy anniversary; and (iii) on that policy anniversary, the policyholder’s age3 has reached 55 or above; and (iv) when HSBC Insurance conducts the review, the HSBC risk rating of the designated investment choices you hold is higher than the designated investment choices selected by the automatic switching mechanism for your specific age.
10. The information provided in this article is for general reference only and does not take into account any individual needs or suitability, and should not be regarded as selling advice. Before taking out insurance, you should discuss an insurance solution that suits your needs with a licensed insurance adviser, and rely on the information provided by the insurer.
11. Last updated: 13 September 2023.

Issued by HSBC Life (International) Limited – a company incorporated in Bermuda with limited liability

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.