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As we get older, start families and take on financial obligations, life insurance becomes increasingly important, perhaps even more so for expats. Here are five questions to ask yourself to work out just what level and type of cover you need.
If you have enough wealth to provide for your dependents when you die, stop reading, you won’t need life insurance! If you’re not one of that lucky few, read on. If you are single and have no dependents or financial liabilities, life insurance may not be necessary however, there are some convincing arguments for taking out life insurance when you are young, even if you don’t yet have a family.
Furthermore, life insurance can be used to pass on your legacy free of inheritance tax as well as providing liquid cash to pay inheritance tax and other charges on your estate. It can also enable you to make charitable donations on your death and pay off any debts which may fall to family or business partners should you pass away.
Term insurance is taken for a specified period and therefore less expensive than whole of life insurance. It is generally used to protect your family against the financial fallout of your premature death until large expenses such as education and mortgage have been paid off and retirement for a surviving spouse is funded.
Whole of life insurance covers you until such time as you pass away and is often used for estate planning purposes as highlighted in point one, to cover your funeral expenses or to supplement your partner’s income. You may have certain specific circumstances which life insurance may be suitable to cover such as to provide for a child with special needs who will never be financially independent.
A basic analysis of your financial outgoings is necessary to work out how much insurance you need. Below is a list of expenditure to consider. It is not exhaustive and not all of it will apply to you but it covers most bases. You may have other regular payments which do not fit into these categories but they should all be taken into account when working out your needs.
Once you have totalled up your required needs, you can subtract your assets and any future income such as a surviving spouse’s salary and work out how much is missing. That is the value of life insurance you will need. It’s not an easy sum to do which is why a professional financial adviser can be invaluable in helping you ensure that your requirements really are covered.
A life insurance policy has an owner, an insured and a beneficiary. These can all be different people but the most usual scenario is for a spouse to own the policy and be insured while the beneficiary is the other spouse. The choice can be important as whether or not the benefit is part of the deceased’s estate can have significant implications for inheritance tax. If the beneficiary rather than the insured owns the policy, the death benefit stays outside the estate. It is worth taking expert advice on this.
There is a bewildering choice of life insurance policies on the market. If you go direct to an insurance company they will be trying to sell you their own policies which may not be the best ones for you. It is advisable therefore to compare the policies of several different companies before taking the plunge, or better still, find a professional financial adviser who has expertise in this field and can offer you a range of options and explain the differences between them in detail.
I would be lying if I said that life insurance is straightforward but that’s no reason to avoid it. With expert help available at no cost to you, it is definitely worth making the effort to get suitable cover in place to protect those you love in case anything should happen to you. Why not contact one of our advisers today?
Would you like to learn more about life and other peace of mind insurance policies? Would you like to be better informed before making a buying decision if so download the free Expat Insurance Consumer Guide and have all your questions answered.
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