Your Financial Life in Hong Kong, Part 5: Insurance

This is part 5 in my 8-part guide to your financial life in Hong Kong. It is mostly intended for foreigners living in or moving to Hong Kong looking to better understand “the system” and better manage their money both in and outside of Hong Kong.  Let me know if you have any questions.

Hong Kong is one of the major offshore insurance centers of Asia, if not the world.  One clue to this is simply the number of insurance companies’ buildings that dot the skyline on both sides of Victoria Harbour, including AIA, Prudential, and Manulife, not to mention the big banks who have never been blocked from selling insurance in Hong Kong, unlike in almost any other Asian country.

As a reminder, GFM is an investment management firm, and while I am a CERTIFIED FINANCIAL PLANNERCM professional with plenty of knowledge and experience in insurance, I am not in the insurance business and do not give insurance advice.  Please speak with us privately for a second opinion or referral to cover any specific insurance needs you may have.

Life Insurance

If you are still covered by a life insurance policy from outside Hong Kong, you may consider getting a new one quoted here just for comparison.  In my experience, US-based life insurance policies are still far cheaper than comparable ones issued in Hong Kong, but I do not have similar data on how other countries compare.

One reason life insurance may be so expensive in Hong Kong is that many Asians have traditionally used life insurance as one of their primary forms of long-term savings and investing, and so competition for actually insuring the risk of dying may not have been as much of a driver as in the US.  Many insurance agents I have met here focus more on selling whole life or investment linked insurance policies, saying that many clients here don’t like the idea of paying into a term policy for 20 years or more and never seeing any of that money back.  In that way, I hold a view that has become relatively well accepted in the US but is still foreign to much of Asia that life insurance should be the lowest cost access to millions of dollars I hope neither I nor my family will ever see (because if they did, that would mean I died!).

I am a strong believer in buying low-cost term insurance and investing the difference, and I regularly show how the difference between the premiums of a whole life policy and a term life policy can be invested even in long-term bonds for better returns with no lock-ups or hidden fees.

Many employers offer group life insurance, but that is often insufficient for a primary breadwinner, who should generally have coverage that doesn’t go away when leaving a company, and generally should be at least 10-20x annual pay to adequately replace lost income.  Just as importantly though, a primary breadwinner should be building up liquid cash and invested reserves to replace the need for insurance as time goes on.

Health Insurance

Unlike life insurance, health insurance is fortunately something much cheaper in Hong Kong than in the US.  In fact, many health plans will offer a cheaper option if coverage in the US is not required and a more expensive option that covers you in the US.  One reason is that Hong Kong has a world-class two-tier health systems with both excellent public hospitals, and well-respected private hospitals, with both charging well below what I’ve seen US hospitals charge.  Private doctors and clinics are also abundant, practicing both western and traditional Chinese medicine, and many compete both over cash fees as well as cashless or reimbursed insurance fees.

Many employers offer group health plans which may or may not be sufficient for your needs, depending on what types of medical care you are likely to need at public vs private hospitals, and whether you need only local vs. international coverage.

For what it’s worth, after I started my company I chose to go with a private elite international plan with a high deductible but very high coverage, and I self insure below that.

Travel Insurance

Travel insurance may be required when applying for visas to travel to certain countries, but fortunately it is one of the easiest types of insurance to buy online.  HSBC probably has the best known online interface for buying a travel insurance policy either for a single trip or for all trips over an entire year, and they sometimes offer a discount to account holders, but even then, they tend to be more expensive than comparable travel policies you might buy from almost any other company.

I usually don’t bother with travel insurance, but as another personal aside have been relatively lucky (or unlucky?) in that two of my most recent policies actually paid off: one for an accident and another for a lost bag.

Other Forms of Insurance

Life and health are the big ones I often talk about, and occasionally find clients that need property, liability, or some other type of insurance.  I maintain referral relationships with insurance professionals I know well that specialize in these areas and pay me no commissions for referrals (though they also refer me needs for investment advice, of course), and am happy to provide a second opinion of any quote you receive from them.

Until next time,

Tariq

+852 9476 2868

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