Hong Kong’s per-capita insurance premiums are among the highest in the world, yet protection still falls short? Why are term life policies so often overlooked?

Many Hong Kong people purchase life insurance. In the event of death, it can ensure that their loved ones will not have to face difficulties in maintaining their previous standard of living due to the sudden loss of a financial provider. In fact, Hong Kong is one of the largest life insurance markets in the world, with per capita life insurance coverage ranking among the highest globally. Even so, the Insurance Authority’s 2021 Hong Kong Protection Gap “Death Risk” Study¹ estimated that Hong Kong’s overall death risk protection gap reached HK$6.9 trillion in 2019, while the average protection gap per employed person was about HK$1.9 million. Is the so-called death protection gap truly an uncrossable chasm?

The mortality protection gap refers to a situation where, if the family’s main income earner were to die unexpectedly, the dependants who rely on that income — typically young children or elderly parents — would be unable to maintain their previous standard of living because of insufficient assets. Such assets include savings, investments, and life insurance coverage amounts. If these assets are not enough to cover the dependants’ future living and education needs, as well as household debts such as a mortgage loan, a protection gap arises.

So how large is an individual’s protection gap, exactly? In fact, there is no universally accepted formula in the market. However, the Insurance Authority’s report mentioned at the outset, the “Protection Gap ‘Mortality Risk’ Study”, estimated that the average protection gap for each employed person is 5.7 times annual salary.
 

Insurance companies and agents often say that Hong Kong people have a significant protection gap and need to buy more insurance. In fact, Hong Kong ranks among the world’s highest in per capita life insurance coverage, and Hong Kong people are already quite generous in their insurance spending. So why does the protection gap remain so large? The reason is that Hong Kong people mainly buy savings insurance, placing more emphasis on savings than on protection. Although policyholders can “get their money back”, the life cover may still be insufficient. By contrast, “pure protection” term life insurance has a relatively small market in Hong Kong and is far less attractive than savings products.

Some believe this is because Asians prefer saving and are less receptive to pure consumption products. In addition, insurance information has traditionally been conveyed mainly through insurance agents. However, term life premiums are cheap, so the commission agents can earn from them is very limited, and they may therefore not actively promote term life to customers.

Although term life insurance only provides cover for a specified period, its advantage lies in its low premiums. Table 1 compares the premiums and death benefit leverage of popular term life products in the market. Assuming the policyholder is a 35-year-old man and the sum insured is HK$2 million, the total premium over 10 years is as low as HK$13,000, easily helping the policyholder fill the protection gap during the most critical 10 years of life.

Hongkongers often emphasise “value for money”. From the policyholder’s perspective, the aim is naturally to secure low premiums and high protection. Table 1 calculates the death benefit leverage of popular term life products, i.e. “sum insured ÷ premiums paid”. The greater the leverage, the better the value for money. Assuming the death benefit for the insured is HK$2 million, the highest death benefit leverage occurs in the first policy year. As most companies offer a first-year premium discount, if the insured dies in the first year, the death benefit leverage of some term life insurance products can reach more than 4,400 times. Over time, as the insured accumulates more premiums paid, the death benefit leverage will also decline accordingly. If the insured dies in the 10th year, the death benefit leverage would still exceed 100 times; if a claim is made in the 20th year, the leverage would still be 30 to 40 times.

If you require life protection for a shorter period, you may also choose to renew every 5 years or annually. In particular, if you choose annual renewal, the premium at the start of the policy is lower, which can be used to manage short-term life risk. However, it is worth noting that term life premiums usually increase with age. If you wish to lock in the same premium for a longer period, you may consider a longer renewal term, such as every 10 years, to help with budgeting. At present, many term life insurance products can be applied for online. Policyholders do not need to undergo a medical examination, and even without leaving home, they can still take out substantial cover with ease to bridge any protection gap.

10Life has compared a number of term life insurance products on the market. For details, please visit the “Product Decoder”:

• Term life (annual renewal)
• Term life (renewal every 5 years)
• Term life (renewal every 10 years) 
• Term life (renewal every 20 years)

If you would like to know more, please contact a licensed 10Life adviser via 10Life Licensed Adviser。

Notes:
1. Insurance Authority “Study on the Protection Gap in Respect of Mortality Risk”
2. The above information is provided by 10Life for reference only and does not constitute sales advice. Information updated as of 15 July 2025  

Last updated: 21 July 2025

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.