Expats – Do you really need life-insurance?

Let’s answer this quickly by saying that if you have no dependents of any kind, and you’re not an important part of a business, then you probably don’t need life insurance!
However, many adults do have dependents of various kinds, young children, spouse/partner, elderly parents/relatives, or perhaps disabled relatives who cannot earn their own living.
Also, if you are the director/owner of a business or if you have a key position within a business, life insurance can be a very important tool. We’ll discuss this aspect later, but first let’s have a look at family dependents.
No time to think about life insurance?
Expats like you are busy people, often in your prime of life, earning good salaries with benefits to match. Few of you think about dying, or what would happen to your dependents if you were to die.
In addition, working away from their home countries, it’s not always easy for you to find the correct advice, or even a company that will provide you with life insurance at all. So, unfortunately, I have met many expats who have either no life insurance, or totally inadequate life insurance to provide for their dependents.
How much insurance cover is necessary?
After realising that you do need life insurance, the next question to ask is how much insurance cover do you need? You need to estimate your dependents’ future needs, looking at living expenses, housing, education and other costs, up to the time that they are able to take care of themselves, if that is possible. However, in some cases, such as elderly, sick or disabled dependents, you might need to calculate for lifetime provision. In each case you must make an estimate for future inflation. Here we are considering long-term costs, but it’s important to understand that some costs after an expats death will be short-term, such as funeral or repatriation costs. Also please don’t forget that you may have existing debts or a mortgage that need to be paid or paid off!
What about short-term costs after death?
This leads onto the next point, how long will dependents need to wait before receiving funds from your estate or insurance policy? If you die intestate (without a will in place), it could be a very long time indeed before your dependents are able to access funds. By the way, it cannot be stressed enough that it’s very important for expats to have a will in place, both in their home country and also a second will in the country in which you are living. With or without a will in place, there needs to be a plan in place so that your dependents can immediately access sufficient funds to cover short-term costs.
Existing assets and the shortfall.
Once you have estimated future costs, you need to calculate the total assets that might be available on your death. The assets could come from a variety of sources, including savings, investment portfolios, pension funds, employer schemes or existing insurance policies. There may also be some kind of government support available, but it’s never a good idea to rely on this, especially as governments around the world try to reduce their expenditures. Once you know this information you can see what capital is available, what income it could provide, and what the shortfall is between existing capital and your dependents future needs.
Obviously each expat has his or her own unique circumstances, but the shortfall should be considered for coverage by an insurance policy.
Don’t forget that your dependents may need to pay YOUR death taxes!
Many expats have substantial assets and, depending on domicile, their estates may be liable for death taxes. This could be a problem for your dependent relatives as cash may not be readily available to pay these taxes. This may force them to sell assets such as the family home. This is another good reason for life insurance, as a policy can be put in place to cover most or all of these taxes.
Business owners and key executives also need to think about life insurance.
Finally, it’s common for expats to be owners, part owners or senior directors of businesses. They and their businesses should consider what will happen in the event of their death. This is especially important in respect of continuing ownership, and the immediate cash flow position of the company. In this case life-insurance can be put in place to enable inheritors, or remaining shareholders, to buy out the deceased person’s shares or to provide cash flow while the business recovers.
Whatever your circumstances, it could be useful to have a discussion with a professional, independent, financial advisor. They can help you work through the issues and create a life insurance solution that will be most suitable for you and your dependents.
In any event, although it’s a morbid subject, everybody should spend a little time to think about life-insurance, OR additional life-insurance! It might save a lot of extra grief later….