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International Life Insurance vs. Domestic Policies what works for expats?
Monday, 15 March, 2021
international v's domestic
introduction
So you’re an expat and you’re looking to deal with your life insurance.
By now you should know that the policy you’ve got from back home probably doesn’t work anymore. And if you don’t then you should be talking to your life insurer.
There’s no point in paying premiums on a policy that’s not going to pay out…
Right?
Who likes throwing their money away, that’s right no one
And that’s what you’re most likely doing if you’re paying premiums on a life policy back home.
Though that could be why you’re wanting to get life insurance set up now.
Though, your reasons why don’t matter
What you want is life insurance that’s going to work if it’s ever needed.
Simple, Right?
And you know what it can be exactly that!
Knowing that what you’re paying for is going to do exactly what it’s supposed to if it’s ever needed.
Even if you end up moving every few years…
Let’s be frank this isn’t unusual when it comes to expat life, getting reposted is what happens
Having one less thing to think about when you’re in the middle of a move isn’t a bad thing, is it?
Imagine having life cover that’s going to pay wherever you’re living
That’s peace of mind!
Right?
Knowing that the financial resources are always available to look after your family.
what are your life insurance choices?
So how do we do this?
What’s the options that we have available to us as an expat when choosing life insurance?
What do we need to consider and what are your choices?
We’re talking about a choice between a domestic or international policy!
Now we’re going to compare these two options
Look at the individual features of each along with their pros and cons
International Life Insurance
flexible protection designed for expats everywhere
Breaking it down
We’ve listed the various benefits involved with both international and domestic life insurance.
Though what does this mean for you?
What difference will each of the categories make to your situation?
Are they all equally as important to you?
Let’s take a look…
Portability
For an expat this is completely essential when it comes your life insurance.
What does it mean?
Well, if you move to another country then your cover moves with you
If there’s a claim on the policy then it’s going to pay out
And you may think that if you’re paying the premiums then that’s a given…
It’s NOT!!!
Domestic policies don’t (in almost every case) have portability.
After you’ve moved to another country and been living there for six months…
A domestic policy will no longer provide you with life cover
International life insurance on the other hand, will!
If you get reposted to another country then an international policy is still going to give you cover.
And it’s going to do so even after those six months have passed.
A domestic policy means you’re going to be reapplying for life insurance, AGAIN & AGAIN!
More forms to fill out, more underwriting and some more medical tests.
There’s another issue here as well…
You’re older so the cover is going to cost you more.
Every time you get reposted to another country and you set up another domestic policy…
You’ll have to keep doing the same thing over and over again
Each time getting more expensive!
Get why portability is so important?
Of course you do,
Right?
continued insurability
This follows on nicely from portability…
That’s because it comes as a direct consequence of not having it
What do we mean by this?
Well, when your cover ends with a domestic policy
You need to replace it…
And as we mentioned that means you’ve got to go through underwriting again
What happens if in the meantime you suffered from a serious illness?
Or developed a chronic medical condition…
How’s that going to impact your chances of setting up a new policy?
Well that depends on what’s happened to you
At best you’ll be paying double what you were paying before
For the exact same cover amount!
As we said that’s AT BEST
Though at worst you might not be able to get anymore cover AT ALL…
What then?
An international life policy isn’t going to leave you exposed
Why, not?
Well, your cover isn’t going to end…
The portability thing we talked about earlier is going to kick in and your policy is going to continue
That means that crucially as an expat this won’t be an issue for you if you’re using international life cover
It really is that simple!
Makes sense, right?
And now…
choice of cover currency
How is currency going to impact your life cover?
Well let’s explain
A domestic policy will be in the currency of the country where you’re living
The question is what currency are your liabilities in?
If you’ve got a mortgage back home it won’t be in the same currency as the life cover, when you use a domestic policy
What currency will the expenses be in to provide for your family?
The likelihood is that if something happened to you then they’d head back home
Back to where their support network is, to somewhere that they know
If in the meantime the local currency has a significant devaluation…
Then there can be serious consequences for them
There may not be enough to clear the mortgage
Or they may have much less to live on when they head back home.
Don’t think it can’t happen?
Imagine THAT!
It could also go the other way as well
Though is that the risk you want to take with your family’s financial future?
That’s what”s happening when…
You use a policy in a different currency from your liabilities and expenses.
With an international policy you have a choice of major currencies
So you set your policy up in the same one as your mortgage
Or the bulk of the expenses that your partner will incur in raising the kids
So they have exactly what they need to clear debts and live the life you want them to live
We’ll look at some of the policy types later and also give you some resources that you can use to choose the right one.
Though right now we’re going to look at the possible restrictions expats can face…
When getting life insurance in another country
limits on cover
As an expat there can be restrictions on certain financial products
That are being bought by foreigners who live there
The amount of life cover that an expat can take may be subject to such restrictions
This was the case in Malaysia where life cover amounts for foreigners had limits
Whilst in local terms these were pretty generous
In expat terms it wasn’t enough to clear the average mortgage debt
So if you’re relying on a domestic policy
There’s a chance that such restrictions could mean that you have to compromise
An international life insurance policy doesn’t have these restrictions
That means that you have enough cover for your needs
NO COMPROMISING!
What’s the point in not having enough life cover?
Right?
Life Insurance policy types
We’re not going to go into massive detail here on this
Though if you want to delve a bit deeper into this subject then you can always do that
And also the bonus material that comes along with it..
In the main the policies available on an international and domestic basis are the same
That is with the one exception,
The “Return of Premium Policy”
These aren’t available in the form of international life insurance.
They are only found as domestic policies
What are they?
Lets take a look…
and the rest
The rest of the features in the summary table or all the same
Both have guaranteed premiums, indexation and additional benefit riders.
So we’re not going to detail each of these benefits though if you want to know more about them…
what's it showing us?
domestic Life Insurance
Let’s take this opportunity to clarifying what a domestic policy is
Because actually this isn’t always obvious
We’ve talked to many expats who’ve taken out a policy with one of the big international insurers
They think that they’ve got international life insurance
And guess what?
They haven’t!
It’s a DOMESTIC POLICY
The simple test is if you moved to another country would cover continue for the rest of the policy term?
If the answer is no then it’s domestic life cover
This accounts for the majority of policies that we take out back in our home country
And if you take out a policy that’s based where you’re living as an expat
then it will most likely be a domestic policy as well
The argument for an international policy
Well by now it should be clear…
If you’re an expat then the only real life insurance option for you is…
Yes, that’s right an international policy
That’s your best choice
What if you’re never going to move?
You’ve planted roots where your living and that’s that
Our response is…
If you’ve taken up citizenship and you’re really staying there for good then fine
A domestic policy will work for you!
If you’re not a citizen of that country then an international policy is still your best option
Let me illustrate why…
once upon a time
A good friend of mine had lived in Singapore for over 20 years
When one day, unfortunately he received life changing news
He had stomach cancer
Him and his partner had separated earlier that year
They had a daughter who stayed with her mum
The split had been acrimonious to say the least
And now it seemed to him that his support network was much stronger back in the UK than it was in Singapore
So he decided to take time off work and move back to be closer to his family who wanted to help him get through it
And that is exactly what he did…
He beat the cancer and made a full recovery
He was in the UK for 2 years
After he was better and got the all clear he moved back to Singapore and went back to work
If he’d have had a domestic life policy and things didn’t have such a happy ending
Then it would NOT HAVE PAID
If he’d have had a domestic life policy and had recovered from the cancer
Moving back to the UK would have effectively ended his cover
His bought of ill health would have prevented him from getting a new policy
Luckily he didn’t have a domestic policy
Even though he was planning on staying in Singapore for good
He had an international life insurance policy
So, nothing changed, his policy continued and so did his cover
You see that, right?
He still had debts to cover and a daughter that would need financial support from him
Plus he’d taken a 2 years off work which had eaten away at the resources that he’d built up
International Life Insurance
flexible protection designed for expats everywhere
a quick recap
We’ve established that portability is essential for any expat
When it comes to their protection benefits such as life cover
Expats move from one country to another
And so should their life cover
We’ve also established that continuity of cover is also a must for expats as well
And the key to this is portability…
If we don’t have cover that keeps going when we move
It can leave us exposed and without life insurance
Putting our loved ones at risk of financial trauma
We’ve also highlighted that having life cover in a different currency
From our liabilities or major life expenses
Will also present financial risk for our loved ones
And we’ve also looked at return of premium policies and why they may not be quite as good as they first appear
Then finally we defined what domestic and international policies actually are
And showed you exactly why an international policy is without doubt…
the very best option if you’re an expat!
International Life Insurance
flexible protection designed for expats everywhere
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