Expat Whole Of Life Insurance Protection
Expat Whole of life insurance is designed so the policy pays out a lump sum to your loved ones when you die. Expat Whole of life insurance is designed to last as long as you are alive before paying out on the expatriate life insurance part of the policy. You pay in a premium every month, quarter or year and when you die, the policy pays out a lump sum to your loved ones. That sounds pretty simple enough, and a great benefit to have. Yet only a small minority of people take out whole of life cover because the premiums can be more expensive – the vast majority of expatriates opt for term insurance instead.
How expat life insurance policies work
The difference between an expat whole-of-life insurance policy and term insurance is that term insurance only runs for a set period before it ceases to pay out. For example this is usually on retirement on your 65th birthday. With term insurance you select how long you want the term of the expatriate insurance policy to last when you get a quote, for example 25 years. If you die in that time it pays a tax-free cash lump sum to your loved ones, but if you live beyond the term, your plan has no cash-in value. As you will see when you compare life-insurance quotes for expats, term insurance is a lot cheaper than whole-of-life cover, which is why so many more people take it out.
Use life cover to cut your tax bill
The main reason people still take out whole life cover is to help cut their family’s tax bill, particularly inheritance tax (IHT). When you die, IHT is charged at 40 per cent on all your assets worth more than £325,000. This includes the family home, which means that millions now pay this unpopular tax. If you take out a whole of life policy and write it under trust, your beneficiaries will receive a cash free lump sum without the policy be added to your estate, this way they can use the money paid out to pay the IHT bill as this should get paid out a lot quicker than if it was added to your estate of assets. Tax planning is a complex area, and the rules are changing all the time, so you should consider getting in touch with UK Expat Pension Reviews for specialist advice about putting your life insurance in trust.
What to watch out for when buying a whole of life policy
Many expatriate life insurers guarantee they won’t increase your premiums and sum insured for the first 5 or 10 years of the policy. At this point, they will review your plan and may hike your life insurance premiums. Make sure you understand how this guarantee works. One of the biggest complaints about whole of life cover is that people don’t know their premiums could be reviewed and their premiums increased every 5 years making the policies vastly more expensive
What else affects your life insurance premiums for expats?
How much you pay will also depend on the sum insured, your age, your location as an expatriate, current state of health, and how much you drink or smoke. The higher the risk, the higher the premium. You can take out a plan for one or two people, although it will only pay out once, on the death of the first person. You should always consider taking out waiver of premium with your life insurance policy because this will cover your monthly premiums if you fall ill and can’t make the payments. Some plans can also include sickness or disability benefits. With some expatriate insurance plans, you keep paying in until you die, which can be expensive if you live to 105. But with others, payments stop once you reach a set age, even though cover continues until you die.