Key Facts Statement

This product is only applicable to related persons of Bank of Dongguan International's corporate banking customers.

For Key Facts Statement for Premium Financing, please click here.

 

Key Risks Associated with Premium Financing

Interest Rate Risk

If customers decide to obtain financing for the insurance policy, an inherent risk is that the interest rates may change over time, which may then require additional funding of interest payments by customers.

Exposure to Risk of Non-guaranteed Benefits

The benefits shown in the insurance policy are for illustration only and are not guaranteed. Customers' actual benefits receivable may be lower, may even be lower than the interests payable for the loan facility, and may even be zero. If the total return from the insurance policy is lower than the interests payable, customers will suffer a financial loss.

Impact of Early Termination/Surrender/Withdrawal

If the Bank exercises its right to terminate/surrender the insurance policy or withdraw cash before the end of the term of the insurance policy, the following situations may arise:

•    The benefits receivable may be substantially less than the total of premiums, interest and early settlement fee (if applicable), especially in the early years of the insurance policy;

•    Customers may lose some or all insurance coverage if the insurance policy is surrendered for any reason. Customers may also be unable to obtain the same insurance coverage again due to factors such as increased premiums or changes in their health condition;

•    Customers may no longer be entitled to dividends, bonuses and other revenue from the insurance policy;

•    The Bank may apply all or part of the benefits receivable under the insurance policy against the outstanding amounts (whether or not the outstanding amounts are under the loan facility); and

•    The termination of the insurance policy may lead to further defaults (for example, if the insurance policy is required as a condition of customers' other arrangements, etc.).

Payment Timing Mismatch

There is a possibility that the proceeds from the insurance policy will not be remitted to the Bank on or before the repayment date as specified in the loan facility letter (e.g., due to loan's maturity date being earlier than customers' insurance policy maturity date, or turn-around-time for policy benefits disbursement), resulting in the default of loan repayment by customers. Customers will be solely liable for any default interest and fees.

Exchange Rate Risk

If the currency of the loan facility and the currency of the amount paid under the insurance policy are not the same, customers may be exposed to foreign currency risk as the amount paid under the insurance policy when converted to the loan facility currency may be less than expected and may not be sufficient to repay the loan facility. Exchange controls imposed by certain authorities may also adversely affect the applicable exchange rate.

Over-leveraging Risk

If customers are unable to fully satisfy the payment obligations in relation to the loan facility to the Bank before the maturity of the insurance policy with their own funds and/or financial resources, customers may have to surrender the insurance policy and use the surrender value of the insurance policy to meet such payment obligations.

For information regarding the risks associated with premium financing, please refer to our "Premium Financing - Risk Disclosure Statement". 

 
For pros and cons of using premium financing, please visit Insurance Authority's website for details:

https://www.ia.org.hk/tc/premium_financing/index.html