Non-Traditional Types of Life Insurance 非傳統的人壽保險類別

Universal Life Insurance 萬用壽險

Universal life is an unbundled form of permanent life cover. Premiums, after charges, go into a policy account. The account earns interest at a crediting rate declared by the insurer, and the cost of insurance and other charges are deducted from it periodically. These items are shown in regular statements, making the policy more transparent than a traditional bundled policy. The crediting rate is not fixed, but the policy usually has a guaranteed minimum rate.

Its main feature is flexibility. Within the policy terms and underwriting requirements, the policyholder can change the amount and timing of premiums, alter the sum insured and make partial withdrawals. An increase in the sum insured generally needs fresh evidence of insurability. Flexibility does not mean premiums can stop without consequence: the policy stays in force only while the account value can meet the deductions. If it cannot, and the shortfall is not paid within the specified period, the policy may lapse.

There are usually two death benefit options. Under the level option, the benefit is the sum insured, so the insurer's net amount at risk falls as the account value grows. Under the increasing option, the benefit is the sum insured plus the account value, so the net amount at risk stays broadly constant but the cost of insurance is generally higher. The cost of insurance is normally based on the life insured's current age and generally rises with age, which can drain the account faster. Partial withdrawals reduce the account value and may reduce the death benefit, and early surrender may incur a surrender charge.

Unit-Linked Long Term Insurance 單位相連長期保單

Under a unit-linked long term policy, premiums, after charges, are used to allocate notional units in investment funds. The policy value equals the number of units held multiplied by the unit price. Unit values rise and fall with fund performance, so the policyholder bears most of the investment risk, and the insurer generally does not guarantee unit values or investment returns. The policyholder's rights come from the policy, and they do not directly own the underlying fund assets.

Two prices matter. The offer price is the higher price at which the policyholder acquires units, and the bid price is the lower price at which the insurer redeems them. The difference is the bid-offer spread. Surrender value is generally the number of units multiplied by the bid price, less any applicable surrender charge. The cost of insurance and other charges are usually collected by cancelling units, so the number of units can fall even without a withdrawal.

The death benefit is usually linked to both the sum insured and the unit value. Common forms are the higher of the two, or the sum insured plus the unit value, depending on the policy terms. Policyholders can generally switch funds and adjust premiums within the policy terms. If the unit value falls too low to meet the deductions, the policy may lapse.

In Hong Kong, linked long term business is Class C long term business under the Insurance Ordinance (Cap. 41), and the Insurance Authority has issued the Guideline on Underwriting Class C Business. Investment-linked assurance schemes offered to the Hong Kong public generally also need authorisation from the Securities and Futures Commission, but authorisation is neither a recommendation nor a guarantee of performance. If such a policy is cancelled during the cooling-off period, the refund may be adjusted for a fall in unit value. A person who wishes to carry on linked long term business must also pass Paper V (Investment-Linked Long Term Insurance).