Types of Investment-linked Long Term Insurance Policies 投資相連長期保單種類

Investment-linked Annuities and Life Insurance 投資相連年金與投資相連壽險

An investment-linked annuity pays an annuity amount that varies with the performance of the relevant investment funds. It should therefore not be understood as necessarily paying the same amount each time. The supplied 2023 study material describes annuities as uncommon in Hong Kong because of limited demand.

Investment-linked life insurance is commonly based on whole life or endowment insurance. The supplied study material identifies flexible premium variable life insurance as the most popular investment-linked long term policy type sold in Hong Kong; its US names include variable universal life and universal variable life. It combines investment linkage with flexibility over premiums and the sum assured.

Choices and Conditions under Flexible Premium Variable Life 靈活保費變額壽險的選擇與條件

These policies may offer the following features, but every policy need not include all of them. Premium arrangements may allow regular premiums to be increased or reduced, top-ups at any time, and single premium options. A premium holiday allows payments to stop temporarily, provided the policy value remains sufficient to meet mortality charges and fees.

The sum assured may also be adjusted under the policy terms. An increase usually requires evidence of insurability: the ability to request a change does not mean that the insurer must accept every increase without underwriting.

Possible death benefit choices are a level death benefit, an increasing death benefit and a 105 Plan. Withdrawals may also be allowed without debit interest, provided the remaining balance is sufficient to meet mortality charges and fees.

These flexible arrangements carry a cost. Policyholders bear higher charges throughout the policy term, including after they stop paying premiums, and should pay particular attention to this cost when making top-ups. A premium holiday suspends premium payments; charges continue.

Minimum Death Benefits under a Protection Linked Plan 保障型投資相連壽險的最低身故保障

A Protection Linked Plan (PLP) is an investment-linked assurance scheme with high insurance protection built into it. To calculate its minimum death benefit, first establish whether the insured is below age 65 or has reached age 65.

Below age 65, compare two amounts: 105% of account value, and the applicable prescribed percentage of total premiums payable before age 65, less withdrawals. The minimum death benefit must reach the higher amount. Do not add the amounts or substitute premiums already paid for total premiums payable.

The prescribed percentages depend on issue age: ages 0–45 allow 150%, 200% or 250%; ages 46–55 allow 150% or 200%; and ages 56–64 use 150%. In a calculation, use the issue age and the applicable percentage specified in the question.

From age 65, the minimum death benefit must be at least the higher of 105% of account value and total premiums paid less withdrawals. The premium comparison now uses premiums paid, rather than premiums payable before age 65. [IA PLP criteria](https://www.ia.org.hk/en/legislative_framework/circulars/reg_matters/files/GL26_Interpretation_Notes_QnA_11A.pdf)

PLP Charges, Protection and Investment Choices PLP 的收費、保障及投資選項

A PLP cannot combine an upfront charge with a surrender charge: only one of these may be charged. Its single ongoing fee must be charged at ILAS policy level as a fixed amount or by reference to account value. Additional protection must take the form of optional riders funded by additional premiums; deducting investment units to pay for these riders is not allowed.

Each investment choice must be linked solely to an SFC-authorized fund, with at least one choice linked to an SFC-authorized Environmental, Social and Governance (ESG) fund. Providing at least one retirement de-risking choice became optional on 12 October 2022. Examples include life-style funds, target date funds or arrangements that reduce investment risk as retirement approaches. [IA PLP criteria and exception](https://www.ia.org.hk/en/legislative_framework/circulars/reg_matters/files/GL26_Interpretation_Notes_QnA_11A.pdf)

ESG analysis considers environmental protection and climate policies; relationships with employees, suppliers, customers and communities; and governance matters such as leadership, executive pay, audits, internal controls and shareholder rights. An SFC-authorized ESG fund must make ESG a key investment focus reflected in its objective and/or strategy. Its offering document must disclose its ESG focus, investment strategy, asset allocation, reference benchmark and risks.

In July 2022, the Hong Kong Monetary Authority issued guidance to authorized institutions on selling PLP. It covers product due diligence, suitability assessment and product recommendation, product disclosure, audio recording and record maintenance, management oversight and protection of vulnerable customers. [HKMA guidance on selling PLP](https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20220708-5-EN)