Automatic Premium Loan
A provision in a traditional life insurance policy that allows utilisation of policy cash value to keep the policy in effect. When no premium is paid after the grace period, cash value in the policy will be borrowed (with interests) as a temporary means to pay for the premiums in default and thus keep the policy in effect. This will continue until either the cash value in the policy has been used up or the outstanding premium is paid.
A beneficiary of a life insurance policy is the designated person who will receive the insurance proceeds if the insured passes away.
To protect customers’ interests, an applicant purchasing a long-term insurance policy is given a cooling-off period to review the terms and conditions of the policy after the purchase. During the cooling-off period, if the applicant changes his/her mind, he/she has the right to cancel the policy and get a refund of premium paid, subject to market value adjustment (if applicable).
Customer Protection Declaration Form
The intent of this form is to ensure an insurance intermediary has clearly explained to the applicant in detail that any consequences, real and potential disadvantages in replacing the existing insurance policy with a new policy.
It is the amount of expenses that must be borne by the policy owner before an insurer will cover any expenses.
Disability Income Insurance
An insurance policy that insures against the risk of loss of income due to disability.
Insurance company distributes its surplus in the form of dividends for the participating policies. It is non-guaranteed and determined by the insurance company from time to time.
A written provision that is attached to the original contract and supplement the original provisions.
It is common to have exclusions in an insurance policy which the insurance company would not be liable for the losses resulting from those specified events under the exclusions.
A period of time (grace period) for the policy remains in effect even after a premium is due.
The insured is guaranteed to renew his/her policy to a specified age regardless of changes in the insured’s health or claims record.
A provision in a life insurance policy stating that the insurer cannot contest the validity of the policy after it has been in effect for 2 years except for fraud and non-payment of the premiums.
An applicant purchasing an insurance must have an insurable interest in the insured item/person. A person is regarded as having an insurable interest in something/somebody when the loss or damage to the item/person concerned would cause that person to suffer a financial loss and/or other kinds of loss.
The level premium rate is based on the insured's attained age and remains unchanged until the end of the premium term.
Refer to the end of policy term, a policy is no longer in effect after maturity.
Misstatement of Age and Sex
A provision in a life insurance policy stating that if the insured’s age or sex is misstated, the benefits payable is the amount that the premium would have purchased at the correct age or sex.
Life insurance plan that shares the company's profit by distributing dividends to the policy owners.
A physical or mental condition of an insured that exists before the issuance of the policy.
A provision in a life insurance policy that allows policy owner to restore a lapsed policy (usually due to non-payment of premiums) in effect if certain requirements are fulfilled.
Suicide Exclusion Clause
A provision in a life insurance policy stating that if the insured commits suicide within a specified period (usually 1 year from the policy effective date), the insurance company will only refund the premium paid without interest as the death proceeds.
Insurance underwriting is the process of evaluating the risk of the proposed insured. Underwriter assesses the proposed insured’s health and financial status to determine the insurable coverage and the corresponding premium rate for the proposed insured.
Some or all insurance coverage will only begin after a specified period of time (waiting period) set forth in a policy.
The Insured Person’s child, stepchild, legally adopted child and foster child, who is eligible to join the plan on the same effective date as the employee or on the 14th day after birth, whichever is later up to 19 years old, or in the case of a full-time student, 23 years old.
An injury or sickness that leads to a loss of function or the ability to function in society or at work. Successive disabilities are treated as one disability unless they are due to causes unrelated to each other or separated by at least 90 days from the date of discharge from a hospital or the last consultation at the doctor's office, whichever is the later.
A registered medical practitioner qualified by degree in western medicine who is legally authorised in the geographical area of his practice to render medical or surgical services, but excludes the Insured, owner, Beneficiary, their business partners and relatives.
It refers to coverage for emergency medical evacuation of the member to the nearest qualified medical facility or the country of residence, as determined by the Emergency Service provider. It also includes expenses for reasonable travel and accommodations of the member resulting from the evacuation; and the cost of returning to either the country of residence or the country where the evacuation occurred, up to reasonable maximum limit.
Guarantee Issue Limit
The maximum amount of insurance that will be issued to an eligible member without the requirement of proof of good health (evidence of insurability).
Any hospital legally authorised to provide facilities for major / complex surgery and full time nursing service, and is not primarily a rest home or a place for alcoholics or drug addicts.
The Insured Person’s legal wife or husband who is eligible to join the plan on the same effective date as the employee or on the date of marriage, whichever is later.
An absolute return is the actual amount of money made by an investment.
A type of investment management where the portfolio manager makes investment decisions and initiates buying and selling of securities in an effort to maximise returns. This is the opposite of passive management.
A numerical value that indicates the excess rate of return relative to a benchmark.
It is a required document that discloses certain aspects of a fund's operations and financial conditions, and is made available to fund shareholders on a fiscal year basis.
The total return on an investment that includes dividend payments and capital.
The division of holdings among different types of assets, such as stocks, bonds and money market.
The different types of assets available to investors. For example, equities, cash, fixed interest or property.
Asset Under Management (AUM)
The market value of assets that an investment company manages on behalf of investors.
Funds that have been approved by the SFC to be marketed to the general public in Hong Kong.
A type of sales charge that is used with mutual funds that have share classes identified as Class-B. Investors will pay the sales charge, calculated as a percentage of the value of the mutual fund shares, when selling the mutual fund shares within a specified number of years. This is different from front-end load.
Benchmarks are well-established and commonly used indices (or group of securities) that seek to be representative of the markets in which the securities trade.
Beta is a historical measure of an investment's sensitivity when compared to a benchmark. If the beta is more than 1, the investment typically moves (which can be up or down) more than the benchmark.
The price a buyer is willing to pay for a security. This is the opposite of offer price.
The amount by which the offer price exceeds the bid. This is essentially the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it.
A fund that invests in debt securities usually issued by governments and corporations.
Calendar Year Return
Returns gotten during a calendar year, that is from 1 January to 31 December.
These securities have a low-risk, low-return profile and include government Treasury bills, bank certificates of deposit, bankers' acceptances, corporate commercial paper and other money market instruments. They are one of the 3 main asset classes, along with stocks and bonds.
A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange. Despite the name similarities, a closed-end fund has little in common with a conventional mutual fund, which is technically known as an open-end fund.
Monetary contributions to a savings or investment plan. They can be regular contributions, where the investor contributes a fixed sum of money over a defined period, or lump sum contributions where the investor invests a sum of money at one time, as long as the amount meets the minimum fund requirement needs.
Expressed as a percentage, it is the aggregate amount that an investment has gained or lost over time, independent of the period of time involved.
A form of risk that arises from the change in price of one currency against another.
The price of the unit or fund that is determined daily.
Defined Benefit Plan
An employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history and duration of employment.
Defined Contribution Plan
A retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee. They often come with restrictions as to when and how these funds can be withdrawn.
The process of holding various types of investments with a view to reduce the overall volatility or risk of the portfolio.
Payouts of gains realised during the year on securities that the fund has sold at a profit, minus any realised losses.
The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.
A fund that invests in local and/or overseas stocks, usually seeking capital growth.
Exchange-traded Fund (ETF)
A fund that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.
A fund that seeks current income by investing in fixed-income securities such as bonds.
A commission or sales charge applied at the time of the initial purchase for an investment, usually mutual funds and insurance policies. It is deducted from the investment amount and, as a result, lowers the size of the investment. It is used with mutual funds that have share classes identified as Class A. This is different from back-end load.
Fund Fact Sheet
A detailed snap shot of the fund citing all the details and holdings, as well as investment strategy and portfolio. Often the details of the fund manager or fund management companies are provided, along with historical performance when available.
The person(s) responsible for implementing a fund's investing strategy and managing its portfolio trading activities. Fund managers are paid a fee for their work, which is a percentage of the fund's average assets under management.
A ratio of portfolio returns above the returns of a benchmark (usually an index) to the volatility of those returns. It measures a portfolio manager's ability to generate excess returns relative to a benchmark, but also attempts to identify the consistency of the investor.
It is a report, similar to the annual report, but available for a shorter period of time with a year.
An SFC-certified individual who is allowed to offer investment advice.
The chance that an investment's actual return will be different than expected.
The amount paid to a fund manager for overseeing the holdings of the fund.
The day-to-day potential for an investor to experience losses from fluctuations in securities prices.
Money Market Fund
An investment fund that earn interests for shareholders while maintaining a net asset value (NAV) per share.
An investment fund that investors’ money to invest in securities such as stocks, bonds, money market instruments and similar assets. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus and fund fact sheet.
Net Asset Value (NAV)
The market value of a fund's total assets, minus liabilities.
The price a seller is willing to accept for a security. This is the opposite of bid price.
A mutual fund that is based in an offshore jurisdiction, which is generally considered to be outside Hong Kong.
A type of mutual fund that does not have restrictions on the amount of shares the fund will issue. This is different from closed-end fund.
A form of risk that summarises the risks a company or firm undertakes when it attempts to operate within a given field or industry. This risk is not inherent in financial, systematic or market-wide risk.
A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. This is the opposite of active management.
A grouping of financial assets such as stocks, bonds and cash equivalents, as well as their mutual, exchange-traded and closed-fund counterparts. Portfolios are held directly by investors and/or managed by financial professionals.
A formal legal document, which is required by and filed with the SFC, that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision.
The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units in a mutual fund.
A fee charged when an investor sells his/her investment in a fund.
Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash.
The degree of uncertainty that an investor can handle in regard to a negative change in the value of his or her portfolio.
A concept that refines an investment's return by measuring how much risk is involved in producing that return, which is generally expressed as a number or rating.
A unit of ownership in a mutual fund.
A risk/reward ratio which compares the rate of return with risks required to achieve that return. The higher the ratio, the higher the risk-adjusted return of the fund.
A static price at which existing shareholders can participate in a rights offering conducted by a public company so they may retain their proportional ownership of the business.
A fee charged during subscription.
The length of time over which an investment is made or held before it is liquidated.
The party named in a trust or plan who is authorised to hold the assets of the trust or plan for the benefit of the participants or beneficiaries.
A unit of ownership in a unit trust/mutual fund.
An unincorporated mutual fund structure that allows funds to hold assets and pass profits through to the individual owners, rather than reinvesting them back into the fund. The investment fund is set up under a trust deed. The investor is effectively the beneficiary under the trust.
Is a measure of the degree of dispersion of its investment returns and is usually measured as standard deviation.