With the outbreak of COVID-19 and the global spread of the epidemic, strict epidemic prevention measures have inevitably been seriously taken all over the world, thus directly and indirectly affecting the economy. Taking Hong Kong as an example, Hang Seng Index has once dropped to 21,696 points in March 2020, which is a 25% drop from the January 2020 high. Similarly, both the Dow Jones and S&P 500 Indexes in the U. S. stock market have also recorded the biggest decline since 2018. When the global market is turbulent, instead of investing money in the volatile stock market, it would be good to consider a savings insurance plan with fixed income.
An insurance plan with “guaranteed returns” can definitely offer a risk averse investor a sense of security in a turbulent environment. Life insurance plan with guaranteed income is far different from buying bonds or placing time deposits. When time deposits mature after a period of time, even though you can get back the principal and interest earnings, the market interest rate in general is relatively low and hence the return is low. Although bonds can also provide you with interest income, you may normally need to invest large amount of money in a single bond. For most life insurance plans with guaranteed income, the guaranteed interest rates offered are relatively higher while the required premium is relatively lower. Insurance plans also contain life protection element, they will not only increase the return potential with distribution of guaranteed cash income and non-guaranteed dividends based on market economy, but they also provide extra protection to the family.
In response to the market needs, Fubon Life has launched the “Power 5 Endowment Plan”, a 2-year-pay, 16-year policy term life insurance savings plan with regular income for its clients. As an illustrative example, Mr. Lee enrolled Power 5 Endowment Plan1 at age 54. He paid the 1st year premium and prepaid the 2nd year premium totaling HKD 1 million*, for which the nominated amount of his policy is HK$1,014,779*. Mr. Lee has chosen to withdraw cash coupon annually to enjoy regular income:
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From the 1st to 5th policy anniversaries, Mr. Lee can receive cash coupon equivalent to 3.5% of the nominated amount (i.e. HK$35,517*) annually, a total of HK$177,586* will be received in the first 5 years;
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From the 6th to 10th policy anniversaries, Mr. Lee can further receive cash coupon equivalent to 7% of the nominated amount (i.e. HK$71,035*) annually and a total of HK$532,759* will be received up to the 10th policy anniversary;
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From the 11th to 15th policy anniversaries, Mr. Lee can further get cash coupon equivalent to 10% of the nominated amount (i.e. HK$101,478*) annually, totaling HK$1,040,148* up to the 15th policy anniversary;
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At policy maturity on the 16th year, maturity benefit of HK$380,542* will also be received;
Together with all the cash coupon distributed, Mr. Lee will receive a total of HK$1,420,691*. If he chooses to retain the cash coupon in the policy, he will even get additional interest payment2, and hence even greater return.
Under global economic downturn, the plan can provide a solution with low risk and substantial returns for investors. While having a medium to long-term savings plan, the policyowner can also get regular income to meet different needs.
*All figures are rounded to the nearest whole number and are for reference only. Please refer to relevant Benefit Illustration document for details.
1. The product is subject to relevant terms and conditions, please refer to the product brochure for details and product risks.
2. The accumulation interest rate of cash coupon is non-guaranteed and is subject to revision by Fubon Life Insurance (Hong Kong) Company Limited (“Fubon Life”) from time to time.
(This information is for general reference purposes only. This information is not an investment advice and does not constitute any offer or solicitation or recommendation of any investment product.)
Information sources:
1. BBC Chinese News’ website: “Coronavirus: Why did European and American stock markets plummet after the epidemic spread for weeks”
Retrieved from: https://www.bbc.com/zhongwen/trad/business-51624651
2. Hang Seng Indexes’ website:
Retrieved from: https://www.hsi.com.hk/eng/indexes/all-indexes/hsi
(This is a translation only. The original article is written in Chinese and you may refer to the original version here for exact meaning).