ARTICLE

What is a protection gap? Analysis, Calculation, and Life Planning

 

5-min read

Updated on 2026-4-30

Author：AIA Content Editorial Team

Recently, a new phrase has been trending online — "doubt life." You may have come across it. Some people express sentiments like, "Work makes me doubt life," while others respond with encouragement, saying, "Doubting life? Go take a walk."
 
In fact, if we take the time to plan our lives and prepare for different stages, we won't have to "doubt life"! This coverage and financial planning blueprint address various aspects, including medical, life, critical illness, retirement, and savings. It will help you clearly understand your and your family's needs at different stages of life and allow you to plan effectively for the future!

What exactly is the protection gap?

What exactly do we mean by a protection gap? The term "Protection Gap" is comprehensive and can be divided into gaps related to mortality risks and those associated with health risks.

The mortality protection gap (MPG)

The MPG explicitly measures the financial impact on dependents following the premature death of a family's breadwinner.
 
According to the Insurance Authority (IA)'s report, the protection gap (mortality risk) is calculated by subtracting a person's available resources from their protection needs.
Needs vs. Resources
Components
Protection Needs
 Future household expenditures, current household debt, future education expenses for dependent children, and future medical costs of dependents.
Resources Available
Savings and investments, assets related to retirement schemes, and existing life insurance coverage.
 
According to The Hong Kong Federation of Insurers, a mortality protection gap indicates that the life insurance payout, combined with other savings, is sufficient to support the dependent(s) financially. This shortfall may prevent them from maintaining their current standard of living.

The health protection gap

The health protection gap refers to the financial burden caused by illness or medical expenses. It defines the protection gap (related to health risk) as out-of-pocket medical costs that impose financial strain on families, as well as the estimated expenses associated with untreated conditions due to an inability to pay.

What does the IA's study tell us about the protection gap?

The Insurance Authority (IA)'s published findings in 2021 that reveal a significant mortality protection gap in Hong Kong.
 
Total Shortfall: The study estimates that the total mortality protection gap in Hong Kong is HK$6.9 trillion.
 
Average Individual Gap: This equates to an average shortfall of HK$1.9 million per working adult, which is approximately 5.7 times their annual income.
 
This average shortfall highlights the importance of assessing whether you have adequate life insurance to ensure your dependents are sufficiently supported in the event of your death.

How does the protection gap change across your life stages?

The amount of life insurance protection you need varies significantly throughout your life as your personal circumstances change. Typically, this need increases when you are younger and taking on responsibilities, peaks during certain life stages, and then decreases as your savings and investments grow and the number of dependents decreases.
The following diagram shows potential protection gaps in different life stages:
 
Life Stage Protection Gap Issues
Young Professional

John, 25: He has been working at an advertising company for several years. Due to the impact of COVID-19, the company is struggling, and he was laid off.
 
John is currently unable to find a job and lacks savings and requiring financial support from his family. Additionally, his plan for a working holiday in Australia must be postponed.
Young Professional

Sue, 30: She has a 3-year-old son and believes that the risk of critical illness is low at her age, so she only purchased medical coverage and did not buy critical illness insurance.

Unfortunately, Sue has developed breast cancer. Along with the reimbursed medical costs, other cancer-related expenses, have arisen, and her plans to save for her son's education must also be delayed.
Family Love and Joy

Rex, 46: He has two children and is confident in his investment decisions, leading him to invest aggressively.


Due to market downturns, his investments suffered significant losses. Without proper financial planning, the family reserves were depleted, resulting in the postponement of his children's overseas study plans.
Enjoying Retirement

June, 66: She retired two years ago. Although she and her family had basic medical and critical illness coverage, they did not regularly review whether their coverage was sufficient.

Both June and her son developed heart disease. They overlooked the potential risk of hereditary diseases, and their existing coverage was inadequate. As a result, they had to use their retirement savings, significantly impacting their retirement lifestyle.

Comprehensive protection at different life stages: Addressing Your Protection Gap

After reviewing the protection gap cases above (including risks related to health, investment, and mortality) reveals that such gaps can lead to serious financial and personal challenges. To pave the way for a prosperous life, it is essential to address the following financial needs for different life stages.

Protection Gap FAQ

Not necessarily. Having life insurance does not automatically mean the protection gap is fully covered. The key question is whether the total payout, together with your existing savings, is sufficient to support your dependents' lifestyle and financial needs over the long term. 

The protection gap is not static. It usually increases when responsibilities grow, such as starting a family or taking on a mortgage, and may decrease later in life as savings accumulate and dependents become financially independent. Regular reviews are essential to ensure coverage stays aligned with life changes.
This information is owned by AIA, and may not be copied or reproduced without AIA's written consent. You may not copy or store this content on any other website or content platform.
 
This information is for general reference only and does not constitute sales advice, product recommendations, or service offers. Before purchasing an insurance product, customers must complete a financial needs analysis. AIA does not guarantee the accuracy and completeness of the content and information provided. AIA reserves the right to pursue legal action and seek compensation for any infringement and/or legal issues.

1. 保險業監管局《香港保障缺口(身故風險)研究》：
2. 保險業監管局2021年保障缺口「身故風險」研究：

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