Whether you’re an expat in your thirties or your seventies, the chances are that you have thought about - or already have - a life insurance policy. And if you have a partner, relative, or child who depends on your income to cover the mortgage and living expenses in your new country, then the chances are that you should invest in life insurance as soon as you can, as a policy can provide for your family should the worst happen and you die unexpectedly.
The most obvious benefit of taking out a life insurance policy as an expat is to offer financial security to your family should you pass away. As an expat family, the chances are that you are well acquainted with your new country of residence, but planning a funeral and worrying about mortgage payments can be much more difficult with language and cultural barriers.
Though nobody can prepare for the loss of a loved one, knowing that you can leave behind a cash sum to your family to cover costs is a welcome relief, and the best part is that you can find a cheap life insurance policy either in the UK or in your new country of residence. As a 30-year-old non-smoker, for example, you can take out a £200,000 life insurance policy over 25 years from as little as £6 per month, costing you just £1,800 over your 25-year policy.
Failing to consider the cost of a funeral could leave your family in financial difficulty at a time when they least need it. By taking out a life insurance policy as an expat, you can shield your family from such inconveniences and ensure that they can comfortably cover the costs of your funeral, whether they choose to have it in your country of origin or country of residence.
See also: Writing wills for expats in Dubai
The average cost of a funeral in the UK is £3,757, with a burial costing around £4,267. In the United States, on the other hand, funeral costs typically range from $7,000 to $12,000, so do your research and make sure you’ve accounted for funeral costs in your life insurance policy.
Alternatively, you might decide to take out a separate funeral insurance policy to plan ahead and cover all of your costs. Such plans often cover the funeral director’s costs and can be purchased from directors themselves or specialist insurance providers, though you should take into consideration your current country of residence and think ahead for the future, too.
Research shows that one in 29 children lose a parent before they turn 16, and as an expat, a life insurance policy can help to reduce the disruption should you die unexpectedly. If you’re an expat in Dubai, for example, and are the sole income earner in your family, the chances are that your partner and children would have to relocate to their country of origin unless they could find a job and pay the bills. A £200,000/$200,000 life insurance policy, on the other hand, would keep them afloat and allow your children to complete their education without having to return to their native country, offering them the best possible start in life.
Your home is likely your biggest asset, but if you’ve yet to clear your mortgage, then there’s no guarantee that it can be passed onto your loved ones when you die. Remember: a mortgage is a major financial commitment, and failure to pay could mean your home is repossessed at the worst possible time, as your family come to terms with their loss.
With an appropriate life insurance policy, on the other hand, you’ll be able to relax knowing your family can hold onto their home. Some insurers offer mortgage life insurance policies as a separate product, covering the cost of your mortgage payments for your dependents if you, or your partner, pass away. This is sometimes sold as “mortgage protection insurance”.
Securing a life insurance policy in the UK can sometimes offer you better protections as an expat than if you were to take out a policy in your country of residence. Of course, you’ll need to check your policy covers you wherever in the world you live, but doing so can offer you better safeguards that aren’t in place in some other countries around the world. Read the small print and consider speaking to an insurance broker or specialist before signing up.
It might sound obvious, but it’s essential that you ensure your current life insurance policy (if you have one) covers you in your new country of residence. If you’re not sure or can’t find the necessary information online, contact your provider as soon as you can to check that you’re protected. Research suggests that only 25% of UK insurance companies offer life insurance policies to British citizens who live abroad, so you might be surprised to hear that you’re not covered when you make the decision to start a new life in another country.
There are dozens of horror stories of expats not checking the eligibility of their life insurance policy and their insurance company refusing to payout. By taking out a new policy in your new country of residence, you can have added peace of mind that you’ll be protected locally.
Whether a mortgage, a credit card or some other form of debt, the chances are that your deceased estate will be obligated to pay off debts before any remaining proceeds are paid out to beneficiaries. Remember that this can vary from country to country, and things can become tricky if you’ve got debts and life insurance policies in different territories, so do your research when taking out or altering a plan to ensure you know your legal obligations.
If there are insufficient funds and assets to pay off your debts (for example, if you were in more debt than your life insurance policy was worth), your estate could become bankrupt.
Although not compulsory, your family could use your life insurance policy to pay off any outstanding debt if they wish to, such as a mortgage or payments on a car, where the only other alternative would be to have those repossessed and for your family to lose out.
However, it’s important to note that with a life insurance policy, beneficiaries should still receive your life insurance payout even if you have outstanding debts or if your estate is bankrupt, as the policy is designed to pay out to the named beneficiaries of the policy rather than to you and your estate. That’s why it is recommended to nominate beneficiaries as soon as possible to bypass your deceased estate and update those beneficiaries should circumstances change, for example, if you were to divorce your current partner.
Again, exercise caution: the above advice relates to estates in the United Kingdom, and laws vary considerably around the world. In territories where your family would be liable for debts after you die, having sufficient life insurance to cover those debts is highly recommended.
Planning for your death is probably not something you want to think about, but failing to plan could mean financial difficulties for your family, as well as grief. Thinking about a death plan isn’t morbid - it’s sensible and helps to lessen the impact on your family when it happens.
Take on board the advice we have offered in this blog post, and be sure to check back to the Money Saving Expat blog regularly for more tips and tricks on living your best expat life.
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