Are you thinking about moving abroad? Life insurance
can be invaluable at such an exciting and stressful time. We take a look at the ins and outs of life insurance for expats.
Why do I need expat life insurance?
When moving abroad, this may be a time in your life when you need financial protection the most. Due to this, insurers are wary of the high chance you will need it when moving to uncertain parts of the world. For example, a UK expat relocating to specific regions may find that insurance policies do not include war risks. Middle Eastern countries with volatile political situations, are another example. So if the breadwinner of a family is working abroad while the family are in the UK, and the person that they rely on income for dies, it can lead to serious problems for the family in terms of finances.
Are you covered by your current insurance policy?
If expats are like the rest of the country, 34% of them will have life insurance at the point when they chose to leave the country. Make sure that you check whether your life insurance policy covers you in your new location. A lot of providers require that you live in the UK for six months of the year, so you are covered for periods aboard that are shorter than that. You may not have to change anything other than providing the company with your new address. However, many providers have limitations, so it’s important to clarify this. In some cases, expats have not done this, and their provider has refused to pay out when they passed away due to the country they were living in at the time.
Generally, you can only extend your current coverage if you can give a date for your return. If you hope to move permanently, you will probably need to find a British firm who specialise in expat coverage or an international company who offer worldwide policies. It’s crucial to inform the insurance company a few months before moving, and to obtain their agreement to cover you in writing.
If your insurance does not cover you, you should consider purchasing a new plan. It’s a good idea to buy one from a UK company before you move, because UK insurance companies often provide safeguards that are not in place in other countries. The main benefit of your present insurer covering you is convenience – in terms of saving money, you may find better deals if you shop around.
Where can I find expat life insurance?
One reputable specialist provider is Expatriate Healthcare. They offer ‘comprehensive any-cause cover’, which includes war and political upheaval, and they will insure you anywhere in the world. A benefit of this kind of provider (designed for expats) is that you are fully covered. Despite this, you are likely to be paying higher premiums in comparison with other deals.
International companies that offer cover include Friends Provident International, Scottish Provident International and HSBC. Friends Provident are known for their international term insurance. They offer different packages tailored to expats living in Africa, Asia and the Middle East. For most customers, a plan like this is cheaper than one with a specialist based in the UK with the lowest level of cover being £10 per month.
What is term insurance?
Term insurance is a life insurance policy providing coverage for a certain length of time. For example, 10, 20 or 30 years, but it can range from 1 – 30 years. The premiums for these policies remain level for the set number of years, but after this time the premium level can increase. If the person with the insurance passes away during the time period specified in the policy, a death benefit will be paid. After this period, the insurance is no longer valid. In comparison with permanent life insurance, it’s cheaper, and it has no cash value. Most term insurance policies can be converted to a permanent policy, despite any changes in your health condition.
With level term insurance, the policy pays a lump sum, determined by you at the outset, in the event of your death during the term of the insurance policy. This sum remains ‘level’ for the time covered, so the full amount would be payable regardless of when a death occurred during the cover.
Benefits of term insurance include initial premiums being lower than permanent insurance, which allows you to purchase more coverage at a younger age. It’s also ideal for a specific need over a period, such as children’s education costs or a mortgage. However, there is no build-up of cash value and premiums rise as you grow older. Whether you purchase term or permanent life insurance depends on different factors, and the decision will be different for everyone.
Death in Service Benefits
Many working for UK companies, such as the Armed Forces, are entitled to death in service benefits as part of their pension or an employee-run insurance scheme. Under the Armed Forces Compensation Scheme, the sum received upon death is often less.
It may be better to choose life insurance
instead, as a downside of relying on death in service benefits is that if you lose or leave your job before returning to the UK, all benefits will be lost. Also, cover from death in service is likely to be much less than that from life insurance and not adaptable to individual needs. This means that you cannot decide who it pays out to.