Life insurance isn’t just for older adults who want to leave something behind for their loved ones. It’s an important consideration for people of all ages, particularly parents who want to ensure their children are financially secure if they pass away.
Something that many people are unsure of is whether or not to maintain a life insurance policy when relocating abroad. Becoming an ex-pat comes along with many significant changes and many question whether paying for a life insurance policy is still worth it when they’re no longer living in their home countries.
If you’re currently in the process of moving abroad, and have the same question in your mind, you’ve come to the right place. In this article, we are going to discuss whether you still need life insurance when you’re moving to a foreign country and the key considerations to take when choosing a policy.
Should You Still Get Life Insurance if You’re Moving Abroad?
Regardless of where you live, life insurance can be important and beneficial for you. Life insurance offers financial protection for your loved ones, particularly those who are financially dependent on you. In exchange for making monthly payments to your insurance provider, they will agree to paying out a lump sum to your chosen beneficiaries if you pass away.
Although life insurance isn’t a legal requirement, it’s definitely something worth considering for several reasons, including:
- Financial security for your dependents, such as your spouse, children, or siblings
- Financial help for your family members with daily expenses, mortgage payments, and tuition fees
- Repaying outstanding debts, such as unpaid mortgages, loans, credit card debt, and previous tuition fees, to avoid these debts being passed onto your family members
- Income tax-free payments to your beneficiaries
- Providing a lump sum for your beneficiaries to use in emergencies or save for a rainy day
Considerations to Take When Choosing a Life Insurance Policy
Life insurance policies can be complicated to understand. It can be even more complex when you’re moving to another country and need to figure out the laws and regulations in your chosen destination.
With so many intricacies and lots of legal jargon, you’ll need to pay careful attention and perform in-depth research to find the right life insurance policy for yours and your family’s needs. To make things a little simpler for you, here are some important considerations to take when you’re choosing a life insurance policy as an ex-pat.
International or national coverage
It’s important to note that not all life insurance policies are valid abroad and many only offer coverage if you live in your home country. You will need to check with your existing life insurance provider to confirm whether or not your policy will become invalid if you move internationally.
Having global life insurance means your policy will remain active no matter where you’re moving to, but you will still need to inform your provider about your move. If you’re unsure whether your existing policy covers you in your new country, read through your policy documents or contact your insurance provider directly. If you don’t yet have a life insurance policy, make sure you sign up for a plan that covers your ex-pat destination.
Tax implications in your home country and ex-pat destination
Tax rules and regulations vary drastically from one country to another. Since life insurance can be subject to various taxes, you will need to understand the tax laws in the country you’re moving to, as well as in your home country, if you plan on maintaining citizenship there.
Understandably, getting your head around tax laws isn’t easy, especially when they’re completely different from those in your home country. It’s a good idea to speak to an accountant, financial advisor, or another legal professional for expert guidance on life insurance policies and taxes. Getting professional advice ensures that your life insurance policy aligns with your finances, needs, and preferences.
Currency exchange rates and inflation
When transferring a life insurance policy to another country, currency exchange rates and inflation are key considerations to take. The value of your life insurance payout will change based on the currency in your chosen ex-pat country, so you will need to check that this payout is still enough to provide for your dependents.
You must also consider changing inflation rates, as they will affect the lump sum your beneficiaries will receive when you pass away. When you move abroad, make sure to regularly check your policy and ensure you’re happy with the final payout amount. You can adjust the value of your life insurance payout according to your income and your beneficiaries’ financial situations.