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5 Reasons Why You Need Life Insurance
Is there one that
applies to you?
What we're going to do...
We’re going to answer the question “Why do you need life insurance?”
You may thinks what’s the point, it’s a waste of money, I’m going to make enough so that I don’t need any.
We’re going to show you that it isn’t and that there’s some really valid reasons for having it. Plus it’s money well spent and it can be pretty good value to fill that gap until you go on and make all the money that you’re going to make.
So here are the five reasons why we need life insurance…
replace your income
As can be the case in many expat families there might be only a single bread winner in yours.
The emotional and financial impact of losing that person will be devastating to your family.
This is especially true when there are children to feed, clothe and educate. Having to raise kids on one’s own is demanding enough. Then having to worry how to pay for everything on top can make matters unbearable.
Life insurance helps end this worry and provides capital to replace any lost income. This means that your family doesn’t have to struggle and there’s financial resources to provide for them almost immediately.
cover expenses for children
You may have decided to save towards your children’s future.
Whether this is to help with tertiary education cost so they don’t get saddled with student loans. Or you may just want to give them a solid start in their lives.
The fact is you wanted to save to give them something and you’re making the effort by putting a set amount of money away each month.
So here’s a question for you…
As of today, have you saved the amount that you wanted to give them?
Are you even close to reaching that target?
Probably not, and if you couldn’t save anymore how far would what you’ve saved go towards the goal that you wanted for your kids?
One way of making sure that this money is there for your kids even if you’re not is by using life insurance. You cover the amount that you wanted to save for them and even if those savings stop the money will be available for them.
If it’s important enough for you to want to save towards, isn’t it important enough for you to insure for?
Making sure that this money is there for your children even if you’re not, it costs a fraction of what you would need to invest to generate it.
If you want to know more about how to set life insurance up so it meets your expat lifestyle then “Click Below” to get our “Expat Life Insurance E-mail Series”
pay off debts
Mortgages, credit cards, car loans or any kind of debt for that matter doesn’t stop when someone dies.
Lenders still expect to get paid even after we’re gone. The responsibility for those payments falls on those that you leave behind.
How long would your family be able to do this if your income stopped?
What would be the financial impact on them?
What would be the resulting emotional impact of having this additional financial pressure placed on them with limited resources to cover it?
If you’ve got a mortgage you might be thinking that they could dispose of the property then pay off the debt.
Selling a property isn’t a quick process. Even when the property market is good you’re looking at six months minimum to complete a sale.
When things are slow then you could be looking at years before you can offload it. The price that they get could also be much lower than expected.
In the meantime ff they can’t finance the debt then there’ll be penalties and possibly even foreclosure on the property.
Depending on how the property ownership is structured.Your estate may need a grant of probate before they’re even allowed to sell it. Unfortunately, this can take many months even years to complete this process.
We’ve seen it take 18 months for estates that have been straightforward to clear probate. The deceased had a clear will in place and nothing was being contested and it still took this long.
All this time your family must find the money to keep paying the mortgage.
Haven’t they been through enough without having to deal with this as well?
Having life Insurance means there’s money available almost immediately.
Your family can use this to pay off these debts and reduce monthly outgoings.
And that means they have one big thing less to worry about and a bit of space to breath.
pay estate or inheritance taxes
Depending on what you have, where you have it, where you come from and where you are can mean estate or inheritance taxes.
This could be levied in your final country of residence, your country of origin or where the particular asset is located. In fact it could be in all of them.
After deducting allowances, death duties range anywhere between 4 & 80% of the net value of your assets.
This means that after any allowance are deducted anything over and above this threshold is charged at the prevailing rate for that location.
Some countries such as the UK charge their nationals inheritance tax on their worldwide assets. This charge is applied even if you no longer live there or haven’t for some time and it is very difficult to for your estate to escape this charge.
Countries such as the UK & USA both charge estate taxes on non residents who own assets there.
“What’s the bog deal?” you might be thinking. “The estate sells some of the assets and then pays the taxes and there’s more than enough left over”
The thing that you really need to be aware of is generally these taxes need to be settled before the assets are allowed to be sold. An estate will remain frozen until the duties are paid in full and only then will it be released to the beneficiaries.
Some countries will allow cash holding to be used to clear off estate/inheritance tax liabilities.
The question is do your dependents have the financial resources to pay any sizeable tax bill?
If they don’t then they’re going to have to borrow the money or leave the estate where it is. Even if they borrow the money it could still take years for the proceeds to be available.
If not then life insurance (if set up properly) is the ideal answer.
It will provide capital to clear any liability and make the assets available for the beneficiaries. The policy can be set up inline with the liability amount and reviewed on an ongoing basis if necessary.
On a little side note if you own property in the UK, even if you’re not British and it may also be held indirectly. It will still be subject to inheritance tax at the net value of the property. Only mortgages taken out at out the time of purchase can be offset against any liability. Any subsequent loans or re-mortgages are not deductible in the IHT calculation.
If you want to know more about how to set life insurance up so it meets your expat lifestyle then “Click Below” to get our “Expat Life Insurance E-mail Series”
provide liquidity
Just because you’ve go wealth doesn’t mean that you’ve got liquidity.
As we’ve already mentioned depending how things are structured your family may have to wait for your estate to clear probate before they have access.
Even if they don’t and the bulk of your wealth is held in property then will assets need to be sold to provide income?
They’ve lost your income and they need to replace it. If there’s no alternative then that means selling assets.
If this comes in the form of property then this is going to take time. What do they do in the meantime?
Life insurance provides this liquidity and gives your family the time they need to make the changes that they need to.
As long as the policy is set up in the right way then your family can have the proceeds of the policy within days. Once they’ve produced a death certificate and submitted the claims form they payment is made.
summary
Life insurance is the point at which all financial planning should start. Unless you’ve protected the ones you love against loss then you shouldn’t be thinking about investment.
Once you’ve created wealth life insurance provides the perfect solution to protect that wealth.
In addition to that life insurance gives your loved ones the time that they need to adjust and make changes.
Most of all it though it gives them security at a time when they’ve experienced tremendous loss. It means that they have the resources to clear debt and secure their future.
If you want to know more about how to set life insurance up so it meets your expat lifestyle then “Click Below” to get our “Expat Life Insurance E-mail Series”
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