Death benefit and surrender
The HKMC Annuity Plan provides the annuitant with monthly annuity payouts until death. So what happens when the annuitant dies before they receive the full premium?
The HKMC Annuity Plan is an insurance product that offers death protection. It guarantees each annuitant instalments of monthly annuity payment equivalent to 105% of the premium paid. If the annuitant passes away before getting 105% of the premium paid, the beneficiary will receive the remaining unpaid monthly instalments until the accumulated amount reaches 105% of the premium paid. The beneficiary can choose to receive the lump-sum amount at a discount. However, the lump-sum amount will be less than the amount received in instalments.
If the accumulated guaranteed monthly annuity payments have already reached 105% of the premium paid, then, the death protection of the plan will cease. The beneficiary will not receive any guaranteed amount after the annuitant passes away.
Loss from surrender
Prior to receiving 105% of the premium paid, you can choose to surrender or cancel the policy, and get back the remaining unpaid monthly instalments as a lump-sum amount. However, the surrender value will be discounted. The earlier you surrender the policy, the bigger the discount. You may also choose to surrender part of the plan. In other words, you can convert part of the remaining unpaid monthly instalments into a lump-sum surrender value. This allows you to continue to receive some guaranteed fixed monthly payout. However, since you have already withdrawn part of the premium, you will be receiving less in your guaranteed monthly annuity payouts and you will also incur loss due to discount.
Whether you choose to surrender all or part of the plan, the final surrender value, plus the paid guaranteed annuity payments, is likely to be less than the value of the premium paid.
Before participating in the HKMC Annuity Plan, you should carefully work out your retirement funds and expenses, and set aside an adequate amount to address contingency needs, such as medical expenses, home repairs, etc. Early planning can prevent you from incurring a loss from surrendering the policy.
24 July 2018