Insurance has three main purposes in modern society
For a regular household or individual given the limited resources, it is difficult to budget for saving and insurance, not to mention bearing risk. However, in the course of crisis, like illness, you might not be able to continue to work and you would be urgently in need of a large medical expense. Not only your health and daily life would be affected, but also your family’s living standard.
We cannot be certain about when or how these risks will affect us, therefore we need to prepare for our future when we are capable. Risks and uncertainties are what we want to avoid but yet inevitable, that is why insurance industry is expanding substantially in many well developed countries.
As an investment tool, Investment-Linked Assurance Schemes connect investment funds with protection. Money invested into the scheme is allocated into different investment funds on the company’s platform. Some of the funds are out-sourced to other fund managing companies, providing a large variety to the insured person.
Investment Funds are a basket of equities and bonds that are chosen and managed by the fund manager continuously. Investors can invest on different regions, countries or industries by choosing the corresponding fund.
Estate duty is a hot issue in many countries, but not in Hong Kong. The Revenue (Abolition of Estate Duty) Ordinance 2005 [“the Ordinance”] comes into effect on 11 February 2006. No estate duty affidavits and accounts need to be filed and no estate duty clearance papers are needed for the application for a grant of representation in respect of deaths occurring on or after that date. The estate duty chargeable in respect of estates of persons dying on or after 15 July 2005 and before 11 February 2006 (“transitional estates”) with the principal value exceeding $7.5 million will be reduced to a nominal amount of $100. In another word, there is no estate duty in Hong Kong since 2006.
Any benefit of an insurance policy is not subject to estate duty in Hong Kong nor China. This provides an immediate cash flow to the family members to support their daily life.