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There are a wealth of benefits that come from taking out life insurance as an expat living overseas. We explore the key reasons in this article.
Lee Doran
Underwriting Manager
International life insurance is there to protect your family if you pass away unexpectedly. But there are many more benefits to choosing life insurance if you’re starting a new life as an expat.
Here’s 8 reasons to consider life insurance if you’re moving overseas.
As you settle into your new life abroad, one of the things you’ll start to think about is purchasing a home for you and your family.
Buying a property abroad can be a long and complicated process. As well as becoming familiar with the foreign mortgage market, you will probably need to go through extra steps to access finance as an expat.
One more thing you may need to do during this process – depending on local laws in your new home country and your mortgage lender’s terms and conditions – is take out life insurance.
Many mortgage lenders will ask you to take out life insurance when you purchase a property. This is so that if you pass away before you’ve finished paying off your mortgage, your life insurance policy can cover the remaining balance.
This ensures the property can form part of your estate, and that your family can continue to live in their home.
In some countries, you will find that almost all lenders require you to take out life insurance with your mortgage. These include:
You’ll also find that the majority of banks in the UK require you to take out life insurance.
The good news is that if you have an expat life insurance policy from William Russell, you may be able to use this to help you secure a mortgage in a foreign country.
However, it’s also important to note that your expat life insurance policy is a ‘Personal Life’ plan. Some mortgage lenders may require you to have a ‘Mortgage Life’ policy, which is a different form of policy.
As well as your mortgage, there are many other things you may want to borrow money for when you move abroad. For instance, a personal loan can help you to pay for a wedding, home renovations, a vehicle purchase or a holiday.
You may also wish to start a new business, in which case you may want to ask a lender for a business loan.
If you pass away before you have finished paying back these loans, your lender may be entitled to take the value of the loan back out of your estate. This is especially true with ‘secured loans’, wherein you put up your assets as collateral.
After you die, lenders will be entitled to take cash or assets to pay back the value of your remaining debt. If you had intended to leave these behind to your loved ones, they may be repossessed by your lender instead, leaving your family empty-handed.
Therefore, it is a good idea to take out international life insurance before you take out any loans abroad. This means that if you pass away your cash benefits can be used to pay back any loans you may have taken out under your name.
With an international life insurance policy, you can live your life to the full as you settle into your new life overseas knowing that if you die you won’t be leaving your family with debt to pay off.
However, it is worth mentioning that international life insurance cannot be used as Business Loan Protection. This is a different type of insurance that a lender may ask you to take out alongside a business loan.
As well as your mortgage and loans, your life insurance policy can also be used to pay off other debts. This could include such things as credit card debts.
Like your loan and mortgage providers, creditors will be entitled to claim your unpaid debts from your estate. Without the cash readily available, they may choose to take your assets. This could include your family home, vehicle or valuable items.
Since your life insurance benefit forms part of your estate, this will help to make cash readily available after you pass away and can help make sure your family don’t lose their most precious things in order to pay off your debts.
They say dying is expensive. In some countries, it can be very expensive indeed.
This is because of the cost of funerals. Depending where you die, your family may opt for a local funeral – and in these cases, they may find themselves footing a very large bill.
The cost of funerals worldwide is at an all-time high, and still going up. Research by SunLife in 2020 found that Japan is the most expensive country in the world for funerals, followed by Germany and the USA.
Country
Average cost (US$)
This isn’t taking into account different types of funeral. The cost of an Islamic Janazah funeral, for example, can be almost twice the price of a non-religious cremation in any given country.
As an expat, dying abroad can put a huge burden on your family and friends, many of whom may need to travel a long distance to attend your funeral.
Thankfully, if you are covered by expat life insurance, your family will easily be able to cover the unexpected cost of your funeral arrangements. Not only will this mean they won’t be left out of pocket, it will ensure they can give you the standard of funeral you deserve.
Speaking of funerals, there is one other thing expat life insurance can help with…
Another option if you die in a foreign country, is to repatriate your remains. This means flying your body home to be buried or cremated.
Repatriation of remains is a complex procedure. Your body must be prepared and stored in a controlled way, with undertakers on both sides of the flight ready to handle your remains.
The cost of repatriation can vary depending on the countries you are flying between. Homeland International reports that repatriation of a single body can cost anywhere between US$3,000 to US$25,000, with the average cost coming in around US$5,000–US$10,000.
Even if you are cremated before being repatriated, the cost of moving ashes can still cost anywhere between US$1,000–US$4,000.
Therefore, if you know that your family would wish to take your remains home for burial or cremation in your home country, expat life insurance can help them to manage this expense.
The payment of a life insurance benefit is usually not subject to any tax. When we pay your life insurance benefit, the full sum will go directly to your beneficiaries. It will not be subject to inheritance tax, income tax or VAT.
This is a benefit because, while settling the rest of your estate, your family may need to pay inheritance tax. The amount of tax they pay will be decided based on your country of citizenship, country of residence and the country in which you died.
Settling your estate can be a complicated process, which is why it’s important your family speak to a solicitor to help them.
Some countries do not charge inheritance tax (although your family may have to pay other forms of tax, e.g. income tax, while settling your estate). These include:
The good news is that your family has options to ensure that they will receive the full sum of your life insurance benefit without having to pay inheritance tax.
One popular option is to pay your life insurance into a trust. In order to do this, you must establish a trust before your death. You can then name that trust as a beneficiary of your life insurance benefit. Paying your life insurance into a trust can help to ensure your life insurance payment will not form part of your estate, and therefore should not be subject to inheritance tax.
You will also not need to pay tax on early receipt of benefits for critical illness. If you take your life insurance payment early while living with a terminal illness, you may not have to pay tax on your benefit (though this may vary depending on which country you’re in), as you will have already paid tax on your premiums throughout your life.
As we’ve said, this all depends on local laws. But the bottom line is that you and your family have options to help ensure they receive the maximum value for your life insurance benefit.
It’s a common misconception that life insurance only pays out after you’ve passed away. If you are diagnosed with a terminal illness, you will be able to take out your life insurance benefit early.
This is to help ensure you can live life to the fullest in the time you have left. Having a cash benefit can be especially important when you are an expat, as you may need to use the money to fly to your home country.
At William Russell, we allow you to claim for an early release of funds if you have been diagnosed with a terminal illness and have less than 12 months to live.
We also offer income protection insurance. This is a separate insurance policy that promises to pay out up to 80% of your annual salary (up to US$144,000) if you are rendered unable to work due to long-term injury or illness.
You are free to choose whether to take your cash benefit early, or whether to keep it to one side until after you pass away. If you choose to take the payment, you are free to spend it as you please, although remember that the cash will then form part of your estate when you pass away, and may therefore be subject to inheritance tax.
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The final, but perhaps the most important reason to take out expat life insurance, is that your cash benefit will help to care for your family after you’re gone.
With William Russell, you can insure your life for up to US$2 million. We also offer an additional accident benefit insurance, which can be taken out at the same time as your life insurance policy. This offers up to an additional US$500,000 if your death is the result of an accident.
Life insurance benefits can provide your family with years’ worth of financial assistance. Your life insurance benefit can help your family to pay for:
It’s also worth thinking about the emotional burden your death will place on your family. Leaving a little something behind can help to ease the grief, for instance by offering your family the chance to take a holiday.
At the end of the day, it all comes down to your family and what you can leave behind for them. Many expats find solace in knowing that, should the worst happen, their families and loved ones will be cared for.
We show the benefits on this webpage in US dollars, but we can also denominate your policy in pounds sterling or Euros. You won’t find complete information for our plans on this webpage, nor the full T&Cs, limitations, and exclusions that would apply if you purchase a life insurance policy. You can find complete information in the plan agreement, which we suggest you read together with this webpage. We work hard to ensure the information we provide on this webpage is accurate and up-to-date, but inaccuracies are possible. We rectify errors as soon as we become aware of them. The T&Cs that apply to your policy are those found in your plan agreement.
At William Russell, we have over 30 years’ experience of providing international life insurance exclusively for expats like you. Become a member today to enjoy worldwide coverage, giving you total peace of mind wherever you move to live and work.
Joe Holden Global Relationship Manager
If you’re ready to see prices for life insurance, click on ‘Get a Quote’ below to head on over to our online quote tool.
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It’s filled with handy information and tips for expats.
We were one of the first insurance providers to cover people living abroad, and we’ve earned a reputation for our wonderful customer service.
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