One policy, seven routes
All rows below assume the same in-force Hong Kong participating whole life policy with guaranteed cash value and accumulated dividends, premiums paid from own funds (premium financing is the exception, since it happens at inception).
| Dimension | Policy loan | Automatic premium loan | Premium financing | Bank loan secured on policy | Policy reverse mortgage | Partial surrender / dividend withdrawal | Surrender |
|---|---|---|---|---|---|---|---|
| Counterparty | Insurer | Insurer | Bank, at inception | Bank | HKMC Insurance via bank | None | None |
| Collateral | Insurer's first lien; policy stays with you | Same | Policy assigned to bank | Policy assigned to bank; bank may surrender on default | Policy charged; death benefit repays | None | None |
| Amount base | Guaranteed or net cash value x 80%-90% less debt | Up to 100% of net cash value (Prudential) | Guaranteed cash value or day-one surrender value x LTV | 90% of guaranteed cash value (WeLab); 95% of net surrender value (CMB Wing Lung) | Death benefit, age, term | Cash value or dividends | Surrender value |
| Rate | Insurer-set, 5%-8% (Nov 2026) | Same | HIBOR plus margin / prime minus margin | 1-month HIBOR + 1.5% (WeLab) | Prime minus 2.5% floating or 4% fixed (HKMC, Jan 2026) | None | None |
| Tenor and repayment | None; repay any time; interest capitalised | Same | Per loan agreement | 6-24 months (WeLab) | Repaid from death benefit | Irreversible | Irreversible |
| Fees | None | None | Early repayment and default rates | 1% early settlement (WeLab) | Interest, mortgage insurance premium, handling fee | Surrender charge (product dependent) | Surrender charge |
| Assessment | None | None | Three affordability tests, IFS-PF | Bank credit approval | Age and policy eligibility | None | None |
| Effect on cover | Sum assured unchanged; benefits paid net of debt | Same | Same, bank repaid first | Same | Death benefit repays loan first | Sum assured reduced or dividends lost | Nil |
| Failure mode | Terminates when debt reaches cash value | Same | Margin call or loan recall | Bank surrenders policy | None (shortfall insured) | Higher lapse risk after withdrawal | n/a |
| Governing documents | Policy terms | Policy terms | IA circular 2022, IFS-PF, HKMA circulars | Loan agreement, KFS | HKMC programme documents | Policy terms | Policy terms, GL29 within cooling-off |
Policy loan versus a bank loan on the same policy
Both happen after issue and both use the policy as security, but the logic is reversed. The insurer lends against money it will pay out anyway, so it needs no credit check, sets no tenor and prices at its own discretion; the only sanction is termination when the debt reaches the cash value. A bank lends against an assigned policy at a market benchmark (WeLab: 1-month HIBOR + 1.5%, 6-24 months, interest-only with bullet repayment, 1% early settlement fee; CMB Wing Lung: 1-month HIBOR plus 0.5%-3.0%, minimum HK$1 million, 12-month revolving) and can surrender the policy on default. Which costs less depends on where HIBOR sits relative to the insurer's rate; the bank route adds tenor, fees, assignment and approval.
Policy loan versus premium financing
Premium financing leverages a new policy at inception and has been subject since 1 January 2023 to the IA's supervisory standards: affordability tests, over-leveraging screening, asset and income verification and the IFS-PF. A policy loan draws on a paid-up policy's cash value with no dedicated regulatory document. The two can stack, since a financed policy may still take a policy loan with the bank's consent, but that means two layers of interest and two lapse lines.
Policy loan versus partial surrender or dividend withdrawal
Partial surrender removes part of the policy permanently and shrinks the sum assured; dividend withdrawal removes accumulated non-guaranteed bonuses and stops their compounding; neither charges interest and neither can be undone. A policy loan removes nothing and costs 5%-8% a year. The only variable that matters is whether the money will come back: if yes, borrow; if no, withdraw.
Policy loan versus policy reverse mortgage
Both are secured on the policy and need no repayment in life. A policy loan is sized on cash value for short-term liquidity; a policy reverse mortgage, run by HKMC Insurance for policyholders aged 55 or above with a fully paid, assignable, non-investment-linked HKD or USD policy, is sized on the death benefit and pays a monthly annuity for a fixed term or for life, repaid from the death benefit with any shortfall insured. Costs include interest, mortgage insurance premiums and handling fees, which reduce what passes to beneficiaries.
Sources and dates
- HSBC Wealth Goal Insurance Plan II policy provisions (Loan Provisions B) — HSBC Life (International) Limited · 2022-10
- Circular on the supervisory standards and key requirements on the use of premium financing (HKMA repository copy) — Insurance Authority (IA) · 2022-04-01
- WeLab Bank Policy Loan (product page) — WeLab Bank · 2026-11-04 (checked)
- Policy Reverse Mortgage Programme — The Hong Kong Mortgage Corporation Limited (HKMC) · 2026-01-31 (rate example)
- Policy loan and automatic premium loan (customer service page) — Prudential Hong Kong Limited · 2026-11-04 (checked)
Cite this page
You may quote this page freely; please keep the source and date. Suggested format:
Policy Loan Guide Editorial (2026). “Policy Loan, Premium Financing, Surrender, Withdrawal or Bank Loan: A Comparison.” policyloan.hk. https://policyloan.hk/en/compare/ (accessed YYYY-MM-DD).