Risks of Investing in Investment-linked Policies 投資於投資相連保單的風險

Market Risk: Variable Policy Values and Returns 市場風險：保單價值及回報並非固定

The value of an investment-linked assurance scheme is linked to the performance of its underlying investments. Fund performance is not guaranteed and prices can rise or fall; poor performance by the selected investments may reduce the policy value.

When comparing investment-linked and traditional policies, distinguish a potentially higher return from a return that is certain to be higher. An investment-linked policy may outperform a traditional policy, but poor underlying investment performance may also produce a lower return.

Liquidity Risk: The Cost of Early Encashment 流動性風險：提早套現的代價

Unlike direct investment in a fund, an investment-linked policy also requires attention to its term. These policies are usually set up for a predetermined period of at least five years, with much of the insurer's initial cost concentrated at the start. Early encashment therefore attracts very high charges to recover those upfront expenses.

Policy value need not equal the amount actually received on early encashment, because applicable encashment charges must still be deducted. Even with a positive fund return, these charges may leave the policyholder receiving less than the premiums paid; holding the policy longer does not guarantee an investment return either.

Credit, Foreign Exchange and Reinvestment Risks 信貸、外匯及再投資風險

Risk is not confined to falling investment prices. Insurers and fund managers can face credit and insolvency risks, and a party that has entered into a financial contract with the client may fail to meet its contractual obligations. These risks concern an institution's ability to fulfil its obligations and differ from the fund's market performance.

Both policy values and underlying fund values may be affected by exchange rate movements. An investment's price may remain unchanged in its own currency while its value falls when translated into another currency.

Money paid into a policy may face reinvestment risk if an investment is suspended or takes an unusually long time to trade. The key issue is that blocked or delayed transactions may disrupt the timing and arrangements for reinvestment.

Risks of Premium Financing and Premium Holidays 保費融資及保費假期的風險

When premiums are funded through premium financing or other borrowing involving leverage or gearing, compare the policy's return with the borrowing interest rate. A policy return below the interest rate payable may cause a financial loss through interest costs; a positive policy return may still be insufficient to cover financing interest.

A premium holiday allows premium payments to stop temporarily under a policy provision. It may reduce policy value and bonuses, where applicable, and may even lead to policy lapse; permission to pause payments does not guarantee that policy value or cover will remain unchanged.