Did you know that;
About 9 million U.S. citizens are living abroad, according to CNBC. And one of the biggest reasons these citizens are running away from the U.S is because of over-stress.
According to a recent report by Gallup, “U.S workers are some of the most stressed employees in the world.”
And due to this, 21% of U.S citizens want to work as a freelancer.
However, we tend to neglect some of the most important aspects while living and/or working abroad. One of them is insurance for our children’s education.
Life insurance for expats is needed even abroad, especially when you’re moving out for a long time, or permanently.
What Exactly is Life Insurance for Expats
Expat life insurance protects your beneficiaries in the event of your death or permanent disablement while living abroad.
Life insurance for expats is a contract between the policyholder and the insurance company. The insurance company is mandated to pay a sum of money to your beneficiaries, in exchange for the monthly or annual premium you’ll pay to the company.
(Premium is a monthly, bi-annual, or annual payment the policyholder pays the insurance company).
However, for this policy to activate, the company must require your past health situation and present health situation.
And, some of the insurers might go further to take a medical exam that doesn’t take more than an hour.
In the medical exam, they will ask you some questions regarding your health conditions.
Also, during the medical exam, your height, weight, blood pressure, and pulse will be documented.
They might even take your urine and blood sample to check for health conditions like cholesterol or even check drug use.
The medical exam will determine the cost of the premium the insurer will issue.
So, if you’re healthy after the medical exam, you will pay lower compared to someone that is found with a health issue.
Also, a smoking habit can increase your premium or even prevent you from getting the life insurance policy for expats you want. So that’s one more reason you should stop smoking.
Most importantly, if you lie over your medical condition, and the insurance company later finds out, it might increase your premium. Or even reduce the benefits your beneficiaries will gain or in the worst case deny them their claim.
So be sure to say the truth when applying for life insurance for expats.
Even though your medical exam can’t dictate whether you are lying or not on some of your past medical conditions. But if the insurance company suspects you’re lying to them, they might attempt to pull your medical record from the MIB (Medical Information Bureau).
So, you need to think twice before you lie to your insurance company.
Types of Life Insurance for Expats
There are two types of life insurance for expats, term life insurance and permanent or whole life insurance.
1. Term Life Insurance
Term life insurance for expats covers the policyholder for a certain period of years. And, the minimum year the policyholder can choose is 5 years.
If you’re planning to go back to the United States then applying for term life insurance should be your best choice. In fact, most of the U.S citizens that live and work abroad go for a term life policy.
The Good Part of Term Life
- It is less expensive compared to the whole life policy.
- It’s also flexible: You can switch between premium prices depending on the needs of your family or beneficiaries. For instance, if you have children you’re taking care of, a large mortgage, and debts to settle, you can go for higher insurance within some time. But, later in life, when you don’t have kids to take care of again, and you don’t have a mortgage to worry about, then you can switch to a lesser premium.
- Term life insurance for expats is simple to get compared to a permanent policy.
The Downside of It
- When your agreed term is over, the policy is over. This is one of the biggest bad sides of term life insurance for expats. Because if you’ve to renew the policy, your current health and age status is what will be considered. For instance, if you were 30 years when you first got your term life insurance and you got a 10-year term life policy. When you’re 40 years, and you decide to renew it, the insurance company will consider your current age (40 years) while renewing your life insurance policy. And your advanced age and any current health condition can increase your premium.
- Also, you might get no claim. If you didn’t die till the term is over, the insurance company has the premium all to themselves without paying your beneficiary anything. (The good news is, you’re still alive). So to stay on the safe side, if you feel you’ll stay away from the United States for more than 10 years, there is no need to opt for 10-year term life insurance, go for something higher.
- There is no cash value in term life insurance for expats. Cash value is an investment feature in permanent life insurance.
Whole Life Insurance
A whole life policy is insurance coverage that covers you till you die. It comes with a higher premium with better payment to your beneficiaries especially due to the cash value feature in it.
The policyholder can withdraw or collect a loan from the accrued cash value.
But, also note that when you withdraw your cash value or collect a loan it reduces the death benefit paid to your beneficiaries.
Therefore, not only does the policyholder get the death benefit, but also has cash value with whole life insurance for expatriates.
Also, some insurers offer riders that permits you to enjoy life insurance benefits when you are older or permanently disabled.
7 Major Factors that Affect Cost of Life Insurance for Expatriates
There are some factors that determine how insurers decide the cost of your premium, and here are they;
This is the major factor that affects the cost of life insurance in the U.S.
If the policyholder is young he has a higher chance of getting a lower premium.
This is because, if you’re young you still have a vibrant immune system and the possibility of you dying anytime soon is low. Therefore, you’ll be paying the company their premium for a long time before they could think of claim filing.
So, to compliment your young age, they will decide to issue you a lower premium.
But this doesn’t mean once you just came out of college and working in another country, that you need to get yourself a life insurance policy (when you are not financially stable).
After your age has been checked, the next thing the insurance company will consider is your health status.
Like I said earlier, the insurer will ask you some questions regarding your health status.
There’s no need to be afraid regarding the medical exam, their aim is just to know your current health condition and know the risk of future sicknesses.
The insurer will ask you questions regarding the previous and current medications you take. If you have had any surgeries. Even your family’s medical history.
They will also go further to ask you about your driving record, and alcohol use.
Make sure, to be honest with these questions, else, you might not get the life insurance policy.
This is not gender inequality. By nature, women live an average of 5 years longer than men.
So women get a lower premium rate than guys because they will stay longer to pay more premium.
Here is where it gets rough. Because if found guilty of smoking, you might likely pay double the premium when compared to someone that doesn’t smoke with the same comparable coverage.
Or even not get the life insurance policy for expats.
Some jobs are health riskier than others.
According to independent.co.uk, the dental hygienist has the highest overall unhealthiness with a 72.8 score.
So this kind of job will have a higher premium than other lower health risk jobs like desk jobs.
The driving record also has an important role to play with your premium costs. If the insurer finds the policyholder guilty of violating traffic laws or lots of driving tickets, it will increase his premium.
One of the reasons U.S citizens decide to visit or reside in another country is because of lifestyle. Please try amazing lifestyles like visiting luxurious hotels, or even visiting Eiffel Tower.
But indulging in activities like shark diving, biking across the desert, or even bull-running can increase your premium.
In fact, being involved in these adventures can even prevent you from getting life insurance for expats. Because insurers consider these activities high risk and are not ready to bet on your survival.
Benefits of Life Insurance for Expats
There are different benefits that a life insurance policy for expats comes with. But the one that is commonly valid for all kinds of life insurance is “Death benefit.”
This is one of the major reasons expatriates get life insurance.
A death benefit is a lump sum of money paid to the policyholder’s beneficiaries when he is no longer there.
Also, most insurance companies offer riders that can enable the policyholder to still enjoy this death benefit even while alive. This could be due to critical illness, or permanent disability.
However, the money paid out before the death of the insured will reduce the sum the insurance company will pay the beneficiaries after the death of the insured.
So, this death benefit can be used by the beneficiaries to do anything they want. There is no law against them even if they misuse it.
They can choose to pay children’s fees, pay debts, pay the mortgage, or even go on vacation.
The death benefit is tax-free. That is, there is no income tax on it, which makes it one of the most important life insurance for expats’ benefits.
Cash value is a feature that attains interest or even has investment gains.
You should note that you can withdraw and collect loans from this cash value. But, the loan comes with interest, until you pay back the loan.
However, if you were unable to pay the loan before you die. Your debt balance with the interest it accrued will be subtracted from your beneficiary’s life insurance payout.
Also, you can withdraw from your cash value, but the money withdrawn is taxable and will also reduce the money paid to your beneficiaries.
Further, In case you feel like canceling the life insurance for expats policy, the cash value can still be paid to you when they have collected their extra charges.
Children’s Education Security
In insurance for child education, your children’s education will be protected. Imagine that your kids will not depend on you even when you’re not there again.
Life Insurance for Expats Conclusion
The summary of it all is, you need life insurance for expats if you plan to stay a long time outside the United States. Especially when you are currently working abroad.
Term life insurance for expats could be your best option if you’re planning to return to the United States, maybe to enjoy retirement back at home.