Life insurance for expatriates
An expat family experiencing life overseas is on an adventure most families would never even consider. When living abroad, days are full of exciting experiences, ups and downs, risks, and rewards. Risks can be similar or different to those faced at home. In the face of those risks, it’s important to be prepared in case a catastrophe happens.
Whether living in their home country or living abroad, most families would have to significantly reduce their living costs to survive financially if the main money earner in the family were to die prematurely. An expat life insurance policy can be set up to pay out a lump sum or a regular income upon death of a family member.
This type of protection can come in the form of level term life insurance, critical illness insurance, or income protection.
Comprehensive life insurance options for expatriates are limited. It is uncommon for an insurer based in the home country of a client to cover that client once they move abroad.
Upon arriving in their new country of residence, most expats quickly discover their options for international life insurance policies are few and far between. Thankfully there are international life insurance plans available for expats like Term Life Insurance.
Term Life Insurance for expatriates
Expat term life insurance should form the cornerstone of any solid financial plan. In its simplest form Term Life Insurance is a contract that allows you to nominate one or more beneficiaries to receive a lump sum payment if you were to die suddenly. Depending on your needs and budget there are policies in the offshore market that can offer coverage from $10,000 USD to over $10m USD. For expatriates an offshore policy is normally the best option as local polices are often not suitable due to residency, currency, and capacity issues.
The proceeds from an international life insurance policy can be used in several ways, including:
- Clearing mortgage or any other debt you have acquired
- Provide an income for your family
- Help with University expenses for children or grandchildren
- Funeral and repatriation costs
- Making sure your business doesn’t die with you
Another great feature of some expat life insurance policies, is the ability to add additional benefits like Disability Cover or Critical Illness cover. With 1 in 4 people touched by Cancer this option can also provide huge peace of mind. For example, if a policy holder is incapacitated and unable to work, the accelerated benefit can be used to help either with medical bills or to provide an income while in recovery.
Life insurance benefits
There are many life insurance benefits, which include:
- Tax free cash lump sum for family members paid out as a death benefit
- Financial safety net for your loved ones, to ensure they are financially secure
- Cover for funeral costs
- Coverage against chronic or terminal illness
- Repatriation of mortal remains
- Financial security for foreign nationals
Different forms of expat life insurance
Here are some of the most common forms of expat life insurance:
- Term life insurance
- Decreasing term life insurance
- Joint life insurance
- Whole of life insurance
- Group life insurance
- Universal life insurance
- International life insurance plan
Do I need life insurance cover?
The best way to answer this is by asking yourself the following question « How many people in my life, including family members and employees, depend on me financially? » If you have dependents relying on your income or have current and possibly future debts, then you certainly require Life Cover. Term Life Insurance is the most affordable and most flexible option, for example it’s the ideal product for the following clients:
- Young families with dependents
- Expatriate families with a sole bread winner
- Business owners through Shareholder protection, Key Man, Group schemes or Loan protection
- Mortgage protection
- High net worth individuals planning for future tax
- Families with Succession planning issues
How much life insurance protection do I need and for how long?
When it comes to calculating a sum assured no two families/businesses are the same therefore the needs of each person will differ greatly. For Individuals the easiest way to generate a figure would be to multiply your yearly income by 15. This is age dependent and certain factors like savings or investments may mean the figure is lower. On the flip side a young family with a large mortgage may need a higher multiple than 15.
A more complex, however more accurate way is to calculate a family’s net worth and then formulate on-going costs, for example children’s education fees, holidays each year and of course on-going income for food, clothing etc. An accurate figure can be generated using this format which then only leaves the term.
Policies offered by international life insurance companies can cover you from 5yrs up to age 99yrs, so it’s important to select the right term. Applying for cover over the short term may not be adequate as the implications of re-applying for cover at a later age can result in paying much higher fees. Premiums will increase due to age, but medical issues may result in loading’s being applied and for more severe conditions an application may be declined. Therefore, our advice is to take cover until at least retirement age as Term products are flexible enough to cancel or reduce the sum assured over time with no fee’s levied by most reputable product providers.
A recent survey found that almost 50% of businesses in the UK don’t have a succession plan in place. If you are a business owner have you ever thought about what would happen to your organisation and employees should something happen to you? The more forward-thinking entrepreneurs will often take out a policy called Key Man Cover, which will help keep the business afloat if you or another vital member of your team dies.
Key Man is essentially a life insurance policy in which an employer pays the premiums and acts as the beneficiary. Should something happen to the key member of staff the business can use the Insurance payment to cover any loss in revenue while searching for a new top executive.
For Shareholder’s Life insurance can also be used as part of a Buy Sell agreement. The partners take out a policy on each other and if either were to pass, the surviving partner uses the proceeds to purchase the deceased owner’s share of the business. In this agreement the deceased family also has the right to sell their shares.
Why do I need to go for a medical examination?
For smaller sum’s assured (under $100k) a medical examination may not be required, however for coverage over this amount the Life Insurance provider will normally ask the applicant to sit a medical. While this part of the application process may seem time consuming and excessive, the request should be comforting. Here is why, essentially before a Life Insurance company settles a claim they have to ask certain questions. If they don’t ask these questions at the application stage, they will need to ask at the claim stage. This can result in a claim being delayed or even refused, for example a grieving widow may not know about a policy holders childhood asthma. Therefore, we only recommend Life providers who medically underwrite applicants as we believe that it’s better to ask these questions today and have a smooth claims process for beneficiaries, compared to an easy application process and a difficult claims procedure.
I already have Life Insurance taken out back home or through my company, so I am covered right?
While having cover though a corporate group scheme is a fantastic benefit, through no fault of the scheme often the amount of cover is simply not sufficient. For example, most Group schemes will cover members for 2-3 x salary. If you have mortgage debt, a young family or little in the form of savings, the benefits provided through a corporate scheme, while certainly helpful, will not be adequate to protect your family for any significant amount of time. Therefore, we advise that you apply for a private policy to run alongside the group scheme, which is fully portable as your next employer may not offer Life cover as a benefit.
If you’ve had the foresight to take out cover before your expat status, it’s imperative that you make sure you are still covered while based overseas as a vast majority of Onshore product providers won’t cover expatriates. Even though you’ve maintained premiums, if you are no longer tax resident in your former country or have spent more than 90 days living in your new country the Insurance company can (and in most cases will) refuse to settle a claim.
Who is the service for?
If you, like many other global Expats, are looking for a life insurance solution for yourself, your family or your business, feel free to complete the below enquiry form and a qualified advisor will reach out to you to provide some affordable international life insurance quotes.