# Policy Loans in Hong Kong: Frequently Asked Questions > Sixteen questions on Hong Kong policy loans: what they are, how much a policy lends, who sets the rate and how it compounds, automatic premium loans, the effect on death benefit and bonuses, when the policy lapses, repayment, tax and Mainland policyholders. - URL: https://policyloan.hk/en/faq/ - Author: Policy Loan Guide Editorial (https://policyloan.hk/about/) - Reviewed by: Policy Loan Guide Editorial Editorial Board - Published: 2026-11-04 - Updated: 2026-11-04 - Language: en ## Basics ### What is a policy loan and who is the lender? The insurer is the lender. A policy loan is money the policyholder borrows from the insurer that issued the policy, secured on the policy's cash value. The policy stays in force and the cash value keeps accumulating, but the insurer holds a first lien and deducts the loan and interest from any amount it pays out (AIA loan terms). No bank, no credit check, no underwriting. ### Which policies can be borrowed against? Policies with cash value: participating whole life, savings plans, universal life and annuities before payouts start. Term, medical and critical illness policies without cash value cannot. HSBC Life's form notes that annuities are not eligible once the annuity period begins and that critical illness plans with cash value stop lending once claims reach 100% of the sum insured. ### How is a policy loan different from premium financing? Premium financing is a bank loan taken at inception to pay the premium, with the policy assigned to the bank, governed by the Insurance Authority circular of 1 April 2022 and the IFS-PF. A policy loan is taken from the insurer after the policy is in force and is governed only by the policy terms. A premium-financed policy needs the bank's consent before a policy loan can be taken. ### Does a policy loan affect my credit record? No. It is not reported to credit reference agencies and the insurer does not pursue repayment. The only consequence of not repaying is that the policy terminates when the debt reaches the cash value. ## Limit and interest ### How much can I borrow? Typically 80%-90% of guaranteed cash value or net cash value, less existing indebtedness. HSBC Life's provisions use guaranteed cash value x 90% minus indebtedness (Oct 2022); Prudential uses 80% or 90% of net cash value; China Life (Overseas) uses up to 90% of cash value less indebtedness (pages checked 4 Nov 2026). Ask the insurer for a quotation rather than estimating from an illustration. ### What is the current policy loan rate? Published examples on 4 Nov 2026: China Life (Overseas) 7%, FWD 7.00% (form dated Jan 2026), Prudential 8%, Sun Life traditional plans 8%, CTF Life 8%, HSBC Life 5% for loans since 1 Dec 2018. Insurers set and may change these rates at any time; they vary by product and issue date. ### How does the interest compound? Interest accrues daily and falls due on each policy anniversary; unpaid interest is added to principal and charged at the same rate (China Life, HSBC Life, FWD, AIA terms). At 7% the balance roughly doubles in ten years; at 8%, in nine. Paying the interest each year keeps the principal flat. ## Automatic premium loans ### What is an automatic premium loan? If a premium is unpaid at the end of the grace period and the net cash value is sufficient, the insurer automatically lends the premium and levy as a policy loan so the policy stays in force. Prudential triggers it one calendar month after the due date; China Life (Overseas) after a 31-day grace period; HSBC Life's provision F2 on the due date if the non-forfeiture value exceeds the unpaid premium. ### Is the rate the same as a voluntary loan? Yes. Prudential charges 8% for both and China Life 7% (checked 4 Nov 2026); HSBC Life counts each automatic premium loan as a policy loan in indebtedness. The limit can be higher: Prudential allows automatic premium loans up to 100% of net cash value. ### Can I switch it off? Usually by written objection, since China Life's rule applies only where the policyholder has not objected in writing. Once switched off, an unpaid premium lapses the policy after the grace period and any surrender value is paid net of indebtedness. ## Effect on the policy ### What does my beneficiary receive if I die with a loan outstanding? The death benefit less the loan and accrued interest. HSBC Life's form states that the loan and interest may reduce the cash value, death benefit, critical illness benefit and monthly annuity. The sum assured itself is unchanged; the deduction happens at payment. ### Does the loan reduce bonuses? Not directly: bonuses continue on the full policy. Indirectly, withdrawing accumulated dividends to repay stops their compounding, and if the loan terminates the policy the terminal or special bonus is paid net of the debt. Most policies do not apply bonuses to the loan automatically. ### When does the policy lapse? When total indebtedness equals or exceeds the cash value, surrender value or guaranteed cash value, depending on the wording (China Life clause 5, FWD note 6, AIA term 8, HSBC Life B3). Nothing is then payable. Borrowing 90% at 7% with no interest paid can reach that point in about three years on illustrative assumptions; paying interest annually removes the risk. ## Repayment, tax and Mainland policyholders ### When must I repay? There is no due date. The loan can be repaid in full or in part at any time while the policy is in force, with no early repayment charge. China Life requires each repayment to clear at least the full accrued interest. Repayment is in the policy currency. ### Is the loan taxable in Hong Kong? No. Loan proceeds are a liability, not income; Hong Kong levies only salaries, profits and property tax and has no capital gains, dividend, interest or estate duty (Hong Kong Legal Hub, revised 29 Oct 2026; estate duty abolished for deaths from 11 Feb 2006). Policy loan interest is not a statutory salaries tax deduction. This is not tax advice. ### Can a Mainland resident apply from the Mainland and receive the money there? Applying is possible through the insurer's app or online platform. Receiving the proceeds on the Mainland is uncertain: insurers may not accept overseas accounts, and Mainland banks may question conversion because the State Administration of Foreign Exchange has publicly treated overseas life insurance as a capital account item not yet opened (2016-2017). The HKMA FAQ (revised 7 July 2026) describes the annual US$50,000 facilitation quota, generally for consumption. A Hong Kong bank account for receipt and repayment is the simplest route; obtain local advice on foreign exchange and tax. ## Sources and dates - Policy loan and automatic premium loan (customer service page) — Prudential Hong Kong Limited 2026-11-04 (checked) https://www.prudential.com.hk/en/claims-support/policy-payment/ - Policy loan (customer service page) — China Life Insurance (Overseas) Company Limited 2026-11-04 (checked) https://www.chinalife.com.hk/customer-service/payment-withdrawal/policy-value-benefit-withdrawal/policy-loan - Automatic premium loan repayment (customer service page) — China Life Insurance (Overseas) Company Limited 2026-11-04 (checked) https://www.chinalife.com.hk/customer-service/policy-services/automatic-premium-loan-repayment - HSBC Wealth Goal Insurance Plan II policy provisions — HSBC Life (International) Limited 2022-10 https://www.hsbc.com.hk/content/dam/hsbc/hk/docs/insurance/life/wealth-goal/2022-dec-wgip2-provisions.pdf - Policy loan online form and loan terms — AIA International Limited 2026-11-04 (checked) https://aia.com.hk/content/forms/af/hk/customer-corner/en/policy-loan-form1.html - Policy loan rates — Sun Life Hong Kong Limited 2026-11-04 (checked) https://www.sunlife.com.hk/en/client-support/policy-loan-rates/ - Our Tax System — Hong Kong Legal Hub 2026-10-29 https://legalhub.gov.hk/details.php?a=5 - Personal cross-boundary remittance between Hong Kong and Mainland China (FAQ) — Hong Kong Monetary Authority (HKMA) 2026-07-07 https://www.hkma.gov.hk/chi/smart-consumers/personal-cross-boundary-remittance-between-hong-kong-and-mainland-china/faqs/ii./II.1 --- This site is run by Policy Loan Guide Editorial, an independent insurance information site providing general education and comparison. It is not an insurer, licensed insurance intermediary or bank, sells no insurance product and accepts no application. Content has not been reviewed, approved or endorsed by the Insurance Authority (IA). For applications, quotations and policy servicing, consult a Hong Kong insurer or licensed insurance intermediary.