This declaration aims to assist you to understand the implications and disadvantages of changing or replacing the Existing Life Insurance Policy to purchase the new life insurance policy (“Policy Replacement”), and your Insurance Intermediary must explain to you the implications of Policy Replacement and the content set out in this declaration in detail.
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Financial implications
- Long term nature of life insurance: Life insurance product is generally to be held for medium to long term. If you early surrender / withdraw policy value / reduce premium / apply for policy loan / suspend or cease to pay the premium, you may suffer losses or need to pay extra charges. You should carefully compare the existing and new life insurance policy, and evaluate whether replacing your Existing Life Insurance Policy is in your best interests before making the final decision.
- Financial losses of the Existing Life Insurance Policy: If you withdraw or partially withdraw the policy value/ surrender or partially surrender, you may lose the financial benefits of the Existing Life Insurance Policy which accumulate over the years (e.g. loyalty bonus, terminal bonus, maturity bonus or reversionary bonus).
- Difference between surrender cash value and total premium paid of the Existing Life Insurance Policy: The cash value received from early surrender or lapse of the Existing Life Insurance Policy may be less than the total premium paid for such policy, and you may suffer a loss.
- Loan interest: If you apply for policy loan, suspend premium payment and trigger automatic policy loan, or apply premium financing from credit institution, the insurer or credit institution will charge you interest. Your Existing Life Insurance Policy may be terminated if the accumulated loan amount (and interest) exceeds the specific level of the account value/total cash value of your Existing Life Insurance Policy. The protection and benefit under the insurance policy will also be forfeited. Moreover, the expected return of the new life insurance policy is not guaranteed to sufficiently cover the interest charges on your Existing Life Insurance Policy, you may also suffer financial loss in this respect.
- Early surrender/ withdrawal charges: If you terminate, surrender, partially withdraw the cash value, suspend or reduce the premium payable within a prescribed period under the policy provisions, you may need to pay additional charge and suffer a loss.
- Policy setup cost and remuneration for the insurance intermediary: A substantial portion of the initial premium you paid for your new life insurance policy may be used for policy administration costs and the remuneration for the insurance intermediary. Therefore, you may bear an additional cost as mentioned above, if your new life insurance policy is purchased for replacing your Existing Life Insurance Policy.
- Higher premium: The premium rate may be higher than your Existing Life Insurance Policy in the view of the difference in age, changes of your health conditions, occupation, lifestyle and recreational activities.
- Benefit illustration is not guaranteed: Although the projected value of the new life insurance policy is higher than that of the Existing Life Insurance Policy, you should be mindful of that the projected value in the benefit illustration of new life insurance policy may NOT be guaranteed and subject to the performance of the issuing insurer of the new policy. Furthermore, the projected value in the benefit illustration of Investment Link Assurance Scheme is based on an assumed rates of return which is not guaranteed either.
- Changes in insurability: If you purchase the new life insurance policy to replace the Existing Life Insurance Policy, the insurer of new policy will re-examine your age, health conditions, occupation, lifestyle and recreational activities. If there is any material change, some benefits covered under the Existing Life Insurance Policy may be excluded from under the new life insurance policy, or be charged for additional premium.
- Waiting period: Subject to the terms under the new life insurance policy, you may need to restart a waiting period in respect of certain benefits (e.g. the waiting periods for Medical benefit, Critical Illness benefit, Suicide, and Incontestability). Therefore, some benefits currently available under the coverage of the Existing Life Insurance Policy may be excluded for a new waiting period after the Policy Replacement to the new life insurance policy.
- Claim eligibility under Existing Life Insurance Policy: The Existing Life Insurance Policy will no longer provide benefits if you surrender the policy or allow it to lapse.
- Changes in coverage: Some benefits or riders under the Existing Life Insurance Policy may not be included or provided under the new life insurance policy. Therefore, you will lose the claim eligibility of the relevant benefits.
Insurability implications
Claims eligibility implications