How much Life Assurance do Expat's need ?
The truth is - everyone is different. Some life insurance policies are designed to cover you mortgage payment only (see “decreasing term” policies below), but you should decide whether there are other factors above the cost of the mortgage that your dependants rely on you for (debts, childcare, school fees, etc). Whilst it does not pay to be underinsured, neither does it pay to be over insured.
Short-term life insurance is available, but is more expensive. There’s no real benefit to a short term life insurance policy for an expat unless you are planning to return to the UK and only want to cover your family while you are outside of the country.
Remember if you pay a higher excess, you will pay a lower monthly premium. Take this into account when deciding how much you should pay.
Don’t double up, and you’ll receive a saving. For example, if you have a travel insurance policy and home contents insurance, you don’t need both to cover valuable items outside of the home – one cover will suffice. On the other hand - always make sure you are covered for everything.
Paying in yearly installments can commonly save you money. If you pay in monthly or quarterly installments for your insurance cover you can sometimes be adding anything up to 30% interest on the amount owed. Check with your provider, as they may fail to mention this.
What are the types of life insurance available to ex-pats ?
Not all life insurance policies are alike. In fact there are a myriad of different policies, but here are the important types for ex-pats:
- Level term life insurance pays out the same amount, no matter when the claim is made during the policy period. If you have an interest-only mortgage this would be a good choice, or if you would like a fixed and pre-agreed cash lump sum to be paid out upon your death.
- Decreasing term life insurance’s payment reduces as the policy goes on. This is a good choice if you have a standard mortgage and your debt reduces on a year by year basis. It is also cheaper than level term insurance. Remember that it may not just be your mortgage you want covered.
- A Family benefit policy is another option that pays out a regular annual sum for a set number of years should the insured pass away. Again, a family benefit policy is far cheaper than a level term life insurance policy because as the policy progressesmthe amount that would have to be paid out reduces.
- Joint expat insurance is a cheaper policy that is shared between you and your partner, but will usually only pay out once if both partners die. It signifies a slight saving as oppose to having two different policies, but is a lot less cover if you have dependents.