The Expat Guide to Life Insurance – Why You Need it and How Much to Get

We all know that ideally we should have life insurance in place, however according to the insurer Swiss Re, there’s roughly a 2.3 trillion pound gap between the amount of life cover Brits typically have and the amount they actually require – and we’re quite confident that this gap exists when it comes to expats too!

In this, the expat guide to life insurance, we’ll cover every consideration for you, from why you need life cover to how much cover to get in place.  Because whilst we all know that life insurance is very important, there are so many different policies on the market from so many different providers, that it can be hard to know where to start looking. 

What’s more, the level of cover we each needs can change quite dramatically at certain key points in our life, and whilst it is critical to have the right level of cover in place, it is as critical not to be over insured.  This is especially true in this day and age when every penny really does count, and none of us want to be wasting money on inessential insurances.

Why Do Expats Need Life Insurance?

When you move abroad you dramatically alter your life – it can be a truly thrilling challenge to set up a new life overseas, and it will involve everything from taking on a new property to taking on a new job.  Perhaps your partner will also find work abroad, or perhaps they will become a stay at home parent, perhaps you will be in a position to privately educate your children, and maybe you’ll even keep your home back in the UK and let it out.  Each of these scenarios I have suggested are ‘events’ that need looking at in life insurance terms.

When you take on a new property you take on a new debt in the form of a mortgage or rental income.  This is a debt that you or your partner would have to shoulder alone if something were to happen to either one of you.  Therefore, it is a debt that needs to be covered by life insurance.  When you take on a new job, perhaps you will find you’re being better remunerated, or your expat tax status means you have more disposable income at the end of the month to enjoy.  Therefore, as your life becomes more affluent, so the standard of living you and your family gets used to improves and increases – therefore you need to increase your life insurance accordingly!  If you or your partner remains in the home to care for your children, the life of the carer has to be insured as well, because if you were to lose the carer, you would have to pay out for child care.

You see, these are just some of the reasons why expats need to think long and hard and carefully about getting life insurance in place, and getting the right level of cover in place too.

How Much Life Insurance Do You Need?

And how long is a piece of string?  Well, both are indeed difficult questions to answer, the former is however vaguely answerable!  You need to take into account your life situation today, what you need cover for for the long-term, your changing status and be realistic about how you or your partner would cope without the income and the support of the other if the worst were to happen. 

You can work with a financial adviser who will help you see what your obligations are today, tomorrow and for the long-term, and in doing so you can determine how much cover you need.  Now, this required level of cover can change as your life changes – for example, you may need to cover your mortgage and the care and upbringing of your children today, but in eighteen years time you may no longer need to have life insurance in place to provide for your children, and in twenty five years time you may not need cover for your mortgage.  So, by working with an adviser and keeping them on board and checking on your finances over your lifetime you can make sure you adjust the levels of cover you have in place as your life develops.

Whilst it does not pay to be underinsured, neither does it pay to be over insured.

Which Type of Life Insurance is Best for Expats?

The three main types of policy available are level term, decreasing term and family benefit.  Level term pays out the same amount at any point that a claim is made during the period you’re paying in to the policy for.  This can be suitable for those with an interest only mortgage for example, and for those who would like a fixed and pre-agreed cash lump sum to ease their burden if the worst were to happen to the life insured.  Decreasing term is often used by those with a repayment mortgage who see the amount of debt they have effectively reduce on a year by year basis.  Basically this form of insurance is cheaper because the longer the policy goes on for without a claim being made, the less the insurance company would have to pay out if a claim were made.

The final option is called a family benefit policy and may be ideal for those who would prefer to receive a regular sum annually should the insured life pass away.  Often a lump sum to clear down a mortgage debt is difficult to handle, and some people prefer to have the security of knowing that should a policy be claimed upon, a pre agreed annual sum would be paid out for the remaining duration of the policy instead.

Again, a family benefit policy is far cheaper than a level term life insurance policy because as the policy progresses, so the amount that would have to be paid out reduces.  Whichever policy is right for you, there are multiple providers offering policies, and your financial adviser will be able to help you find the most suitable product to match yours and your family’s requirements.

Finally, it is just left for us to say that you have a real obligation to get life insurance in place if you have dependents, family or debts such as a mortgage, loan or even an outstanding credit card balance.  So, don’t shirk your responsibilities, and don’t be overwhelmed by all the choices of policies available, use a financial adviser to help you find the right policy for you.