It is widely known that life insurance is a critical part of a financial plan for expatriates and global nomads living abroad, but most living abroad do not know where to turn for coverage. Life insurance is required because you will have someone who is financially dependent on you should you die. Learn the importance of life insurance for Expats. It is not something that we like to think about and will go out of our way to not consider for obvious reason’s.Life insurance is difficult to consider when living in your home country but is even more so when living as an expatriate and more often than not expatriates do not consider the importance of international life insurance.
Why Expat Life Insurance?
You will want to buy international life insurance as an expatriate because you have considered how your partner or family members will be impacted financially when you die. Expatriates life insurance plans are very similar to domestic plans that you will find in North America or Europe but are designed to cover expatriates living offshore and pay a lump sum on the death from sickness or accidents.
Here are 8 points to understand importance of life insurance for Expats and global citizens:
One: Local life Insurance plans are not available or desirable
This is the most common reason to buy global life insurance as many expatriates will not be eligible for life insurance in their destination country. You often have to be a permanent residence in that destination and it may take several years to get one or you may not want to get permanent residence for tax reasons. In many nations around the globe, there may be little or no international life insurance coverage available for expats or locals. In others, the local life insurance is not desirable or the local insurance companies are not secure.
Two: You have a family
This is perhaps the biggest reason why expats and global nomads buy life insurance. If you have young children who are financially dependent on you, it is vital that you buy enough life insurance to secure their financial future and pay for adequate housing, education and other needs. Buying expat life insurance is a selfless act of love for your partner and children when living abroad – you buy it because you care.
Three: Your partner who is financially dependent on you
While many couples are both working, there are still a lot of expatriates living abroad who have one spouse who is not working by choice or is not allowed to work abroad in their partner’s location. Also, one spouse may make more money and has a higher life insurance need or both partners need to buy life coverage because they are equally dependent on the other.
The general rule is the more you make the more international life insurance you should buy. Think about how much income you will need to live comfortably if your spouse or partner dies prematurely and the interest rate that that money from life cover will produce for a period for 10 to 20 years for example. The Life Happens life insurance needs calculator is a great way to determine how much expatriate life insurance you should purchase.
Four: A company needs to insure a shareholder or key employee living abroad
Another reason why expatriates buy life insurance is that they are a key-person for the company and their death will severely impact the company. Also, we see shareholders obtain buy-sell life insurance to purchase the shares of the deceased company owner.
Five: You have a mortgage
This is a very common reason why singles and couples will buy expat life coverage. It is always a good idea to buy enough life insurance to pay off your mortgage debt should you or your partner die before the mortgage is paid off. The bank coverage may be expensive or not available to expatriates who have domestic or overseas mortgages.
Five: To pay estate taxes while living abroad
Most expatriates will not have any tax obligations when living abroad or may live in jurisdictions with limited taxes, but we have encountered expatriates who leave large estate tax obligations in their home country that will require enough life insurance to pay that tax liability that is due on death. Life insurance is a much less expensive
Six: You need portable life insurance
Expats often move from one country to another for a variety of reasons, especially digital nomads. The life insurance you buy in one country may not be portable and you may also have to deal with currency fluctuations and restrictions. An international expat life plan can solve this for global citizens who are mobile.
Seven: Your employer’s group life insurance can’t cover you living and working abroad
Most companies have group insurance policies that have a multiple of income for life insurance, but the plans are not designed to cover expatriates. We do sell group expat life insurance plans to multinationals, but they often have to be several expatriate employees for a viable plan. TFG Global, which owns and operates this site, has access to some excellent group life insurance plans for expatriates!
Eight: Employer expat life plan is limited
Another consideration is that your employer may only provide a flat amount of coverage or low multiple of income that will not give you enough life insurance to cover your debt and family obligations when living abroad, especially if you have children and a mortgage. So supplemental overseas life insurance is purchased to make up for that shortfall.
Locals are Not Eligible
In our experience, we have found that individual international life insurance is NOT available to local citizens living in their country of citizenship for a variety of reasons. There are also a host of countries where the insurers we work with are unable to cover expatriates, such as Canada and the USA. Frankly, if you are an expatriate living in the USA or Canada, you are best to buy a local plan there, but check if the plan can be continued if you move to another country.
Is Expat Life insurance Cheap?
The short answer is no it is not. Remember that there are not a lot of insurance companies that can offer expat life insurance coverage. Also consider that living abroad in a less developed country is riskier than in your “first world” country such as Canada, the USA or the UK. The cost will depend on your age, health status, education and if you have smoked in the last 12 months. The cost will vary depending on other factors as well, but regardless, you should buy expat life insurance if you need it.
Will Domestic Plans Cover Expatriates
This can be a tricky question to answer as there are so many expatriates from numerous countries. Some countries you are moving to will cover new arriving expatriates or after you have set a permanent residence there. Other nations will simply not cover foreign nationals living in their country. For our clients living in less developed countries, there may simply be no domestic life insurance available or the options available may be financially unreliable and not portable should the global citizen move to a new country.