top of page
Clive Macdonald

How To Calculate Your Expat Life Cover! Which Elements You Need To Include...

A Quick Recap!

expat life cover

We're looking at one of the biggest threats to the financial security of any expat family.


Whether you're an expat or not, financial planning starts with protection. Get this put in place as your number one priority and then you move onto the other stuff.


As you've discovered (if you've been following this series) things are a bit trickier for expats.


Which is why we've put it together!


We want to alert you to this massive risk that often goes completely unnoticed. And then give you the tools to deal with it.


That's what we're dealing with right now, one of those tools.


And that's calculating how much expat life cover your family needs.


One big issue for expats, is that no one wants to talk to you about life insurance. Most financial planners are only interested in talking to you about investing.


So, you need to have an idea about how it works so you can make sure that your family's protected.


After all, you've already seen the impact on your family if you don't have life insurance


So, last week we looked at the "Multiple of Salary" method of calculating life insurance.


We highlighted the benefit (it's easy and quick) and also the downsides of using it.


Finally, we briefly looked at the "Real Life Benefit Requirement" method.


Today we're going to explore that in more detail by starting to look at the different elements to include.


Before we do that...


Here's another opportunity to get your copy of our...


"Expat Life Insurance Confirmation Pack".


It's completely FREE and has resources to help you confirm your life cover still works. Plus it gives you a step buy step guide of how to do that and gives you questions that you should be asking.


So CLICK the image below and get your's NOW!

Life Insurance For Expats

Right!


Let's start looking at the different elements that's going to make up your calculation...


Liabilities

Let's get going with those liabilities.


These are the financial commitments that there's no escaping from.


It’s the things that will still need paying, if they no longer had your income.


If they didn't have the financial resources available to deal with them. What would be the impact on your loved ones?


Would they be able to maintain your home?


Are your kids going to have the same educational opportunities available to them?


The first thing on the list of liabilities is your debts.


Expat Life Cover To Clear Those Debts

There’s no running away from debts even when we’re gone, they still remain…


That's mean that they fall on the people you leave behind  


If we don’t provide for them then they can cause enormous stress for our family, even financial ruin.


Mortgages and loans need paying off, lenders expect their money back even if you're not around. Repayments have to continue until the debt is completely cleared.


If this doesn’t happen then the lender will force the sale of assets.


When this happens, it's the lender who puts the property up for sale. They're focus is to recoup as much of the debt as quickly as possible.


Getting the best price for the property doesn't fit with the lenders objectives.


So, if there’s any residual debt after the sale of the property, then your family are expected to pay it off. And if they can't then it will ruin there financial prospects going forward.


For them this means getting any form of credit will be impossible or very expensive.


So, first things first make sure that there's enough life cover to clear all outstanding debts.


This should always be your priority for your life benefit calculation.


If you've got a mortgage then you should have life cover to clear that debt in the event of your death.


You may have the misguided notion that because the property's value is more than the mortgage…


You don't need to make any provision to clear the debt.


Hey, after all they can sell the property, clear the mortgage and buy something else.

Right?


Sorry, that's plain stupid!


If you want to leave your family in a big financial hole, facing homelessness, then go ahead.


As we mentioned the bank will expect your family to keep making the mortgage repayments.


Or to completely clear the debt.

Expat Life Cover

So how does all that equity in the property help them do this?


Well it doesn’t, does it?   


You might be saying "that's why they sell it!"


That’s right they can…


But, let me ask you this, what happens if this doesn’t happen quickly?


Would they be able to afford to keep making the mortgage repayments?


That's because whilst the property was on the market that's exactly what they'll have to do!  


If they can, then how long would they be able to keep it up?


Even in the most frothy property markets it can still take 6 months plus to sell a property.


In a tough property market it could take years...


And all that time, the lender will want the mortgage repayment every month.


If they don't have the resources to keep paying them, then there'll be penalties and interest.


This means the debt is going to get bigger!


On top of that they may not get the price for the property that they expected. Which means they'll have even less money available.


And as we mentioned at earlier if your family keep missing the repayments. At some point the lender is going to force the issue and repossess the property.

 

At that point it doesn't matter how much equity you think you've got in that house.


It's important to reiterate, the bank is going to sell it with one aim in mind...

That's getting their money back as quickly as possible!


There's no consideration for your family they just want that liability gone.


So where would that leave them, not in a great place, right?


Life insurance eliminates all this…  


The benefit payment means that they have the money available straight away.


They have the resources to clear these debts and that means one less thing to worry about.

 

They have somewhere to live and if they need to sell that property they can do it when it's best for them.


You've given them choices!


So, whilst making sure that your family has a roof over their heads should be a top priority. Any debt can cause problems for your family.

 

This means that you should make provision for all your outstanding debt.


Whatever debt you have mortgage, car or personal loan. Look at the latest statement, take the most recent outstanding balance and use that.

 

If you have credit cards then look at the credit limit that you have available or the average monthly spend.


With regards to your average monthly spend then only use this if you clear your balance off every month. If you don't use your credit limit instead.


If you have any other debts with family, friends or employers then factor these in as well.


You get it, Right?


In a moment we're going to look at other liabilities that your family might also face and need providing for.


Before that...


Here's another opportunity to get your copy of our...


"Expat Life Insurance Confirmation Pack".


It's completely FREE and has resources to help you confirm your life cover still works. Plus it gives you a step buy step guide of how to do that and gives you questions that you should be asking.


So CLICK the image below and get your's NOW!

Life Insurance For Expat Families

Now, it's time to move on and look at those other potential liabilities.


Expat Life Cover To Raise Those Kids

If you have them then you already know, kids cost money and lots of it.


So, I want you to imagine, if your income is no longer available what would that mean for them?


As an expat there’s a strong possibility that your kids go to an international school. It’s also likely that your company pays these school fees,


So, what happens if that stops?


Where would your family go?


Would they return back to your home country?


Do you still want them to go to a private school?


If you do, would your partner have the money available to send them there?


If the answers “No” then you’re going to need to factor this cost into your life insurance calculation.


How do you do this?


Life Cover For Expats

Well, go online and search for private schools in the area that your partner is most likely to relocate to.


Look at the the fee schedule for the school.


Start with the current year that each child is in at the moment. Then total up the amount that it would cost for them to complete their secondary education.


So if your kids are currently in years 6 and 3 then you'd add up the fees from 6-13 and 3-13. This gives you the cost of their private education.


You may say what about inflation?


Don't worry about it in this instance. That's because there'll be extra money from fees already paid or the money can be invested to offset it.


It may not only be school fees that needs factoring into the equation!


Are you planning to provide financial support for them through college or university?


If you don’t know what the costs would be and need some help figuring out…


Then take a look at our university fees calculator.


Even if you don’t plan to continue private education for your kids your partner still needs to raise them.


According to The Times newspaper it costs around £223,000 to raise a child to 18. This figure includes housing and childcare.


Obviously, this figure will vary from one family to another. For some of you it could be much higher whilst for others it could be a bit lower.


With regards to the impact this has on your life insurance benefit. Much depends on how old your kids are right now.


The younger they are the more you’ll need to factor into your calculation.


Let’s be frank, if you’re not around, your partner is going to need childcare and lots of it.


Even if both parents are working losing the income and support of one has a financial impact.


So, for each child and each year they have to 18 or 21 you’re looking at a cost of around £13,000 per year.   


That's a chunk of change.


What Next?

Once you've got all these figures together...


You need to total them up. This gives you your total liability figure.


This includes debts, education costs and the cost of raising each child.


That's it for today though we think that we've given you more than enough to digest for one week.


Next week we're going to look at the income needs for your family and what to include in this part of the calculation.


One final thing for today...


If you haven't done so already, get your copy of our...


"Expat Life Insurance Confirmation Pack".


It's completely FREE and has resources to help you confirm your life cover still works. Plus it gives you a step buy step guide of how to do that and gives you questions that you should be asking.


So CLICK the image below and get your's NOW!

Expat Life Insurance

Recent Posts

See All

Comments


bottom of page