Looking around, I find that there is little guidance on life insurance as a product. Like any other product, there are various options, providers and types available on the market. With most other products of this nature we would seek advice, however, with life insurance lots of people are willing to simply go online, get a quote and buy the cheapest option they find.
It is probably fair to say that most of us actually ‘need’ some life insurance and that it’s purpose is to provide for those most important to us in a tragic scenario. Therefore, why would we not look to get advice on how we calculate the correct amount, especially when considering the significance?
So let’s look at some of things we should consider but please do get in touch to go through your particular circumstances:
1. Don’t Guess The Amount Of Cover Needed.
Many expatriates will guess the amount of cover they need. Meeting people with half a million dollars or a million dollars of cover is not uncommon. Equally, arbitrary statements such as ’have 10 times your salary’ are also reasonably useless. Life insurance is like any other insurance, in that it exists to cover liabilities and these can be calculated through a logical process.
2. It Isn’t Health Insurance.
A common misconception is that the health insurance, provided by your employer, is the same as Life Insurance – it is not. Health insurance will pay treatment costs if you break a leg, for example, but it is not going to pay out if you die unexpectedly. That said, it is not uncommon for employers to provide Death in Service Benefit although the terms of this can vary wildly from employer to employer.
3. What About Tax.
Depending upon the circumstances, life insurance can be taxable upon the death of the client. This can, somewhat, make it pointless. Often, however, this can easily be mitigated by placing the policy into a trust which can generally be done free of charge. Indeed, any policies already in existence can generally be placed into trust also.
4. What if you were to fall ill?
Statistically, we are much more likely to fall ill prior to retirement than we are to die, so don’t forget about Critical Illness Cover. The general rule of thumb here is that anything from 6-24 months worth of salary should be held as Critical Illness Cover. If you were to get sick and be unable to work for a year or so then this would enable you to get treatment whilst still pay the bills. Of course, some could argue that you could be ill for longer than this, which is true no matter how unlikely, but CIC will always be more expensive than life cover and, therefore, there is a balance to be struck.
5. Choose A Reputable Provider.
The whole thing would be a rather pointless and a tragic waste of money, were the policy not to pay out if your loved ones ever tried to claim on it, so don’t use an unknown provider. Choose a large, well known outfit, with a reputation for honouring honest claims.
6. Consider The Options.
Both level and decreasing term have their uses. Take advice on which one best fits your circumstances and why.
7. How Long Should You Have It?
The ‘term’ is selected at the outset. So it is important to include it as a consideration within the logical process that also assists in helping us calculate the amount of cover required.
As always, please do reach out to me if you’d like to go through the process and work out how to best protect your loved ones.