Life Insurance for Expats: Why Canceling Your Personal Policy Could Be a Huge Mistake

We recently had an expat client reach out to cancel their personal life insurance policy. Naturally, we wanted to understand if this was due to the client being dissatisfied. Was there an issue with either the insurance provider or our service levels. The response was reassuring! They were completely happy with both the insurer and our service.

The real reason behind their decision was that they had switched jobs. Their new employer provided a significantly enhanced corporate benefits package. Part of which included a very generous life insurance benefit. So, they felt it unnecessary to continue paying premiums on their individual policy.

This immediately raised alarm bells for us. We asked if they could spare us 20 minutes to talk this decision through before taking action. They agreed and we arranged a convenient time for this to take place...

So, after this discussion we managed to persuade them to keep their personal policy. This wasn't simply a desperate attempt to retain a client. Rather, it was about preventing them from making a potentially significant financial mistake. One that many people inadvertently make under similar circumstances.

Here's why canceling their personal life insurance could have been one of the biggest financial mistakes they'd ever make as an expat:

Why Corporate Life Insurance May Not Fully Cover Expat Needs

Employer-provided life insurance can appear attractive, especially when working abroad. Often, it's provided as a multiple of your salary basic. Typically two to four times your annual earnings though it can be higher. On first impressions this may seem like a large amount.

Though, as an expat, when you analyse your financial obligations it isn't going to go a long way. Even if your company provides a benefit equivalent to ten times your basic salary. This still may not be enough to provide for your family if they lose your income. A simple multiple of salary isn't the best way to calculate life insurance needs. Personal circumstances vary from one family to another and so does our life cover needs.

You may have more kids than your colleague and more debt. Ten times salary might be fine for them but falls way short for you. If your family lose your income then life insurance gives them financial stability. So, making sure that you give them enough to clear debts and have choices is essential.

Understanding Your Actual Financial Needs

If yours is the main income coming into your household, your residency visa comes with it. That means if anything happens to you then your family will need to relocate. This could be back home or somewhere else where they're eligible to stay. This means that they'll be subject to international relocation costs. In addition  to that education cost will now need covering. As an expat these would have been covered or subsidised by your employer. If there's a mortgage that needs paying will there be the resources to do that? This is all before we start taking into account living expenses. If you've got young kids is your partner going to be able to work. Assuming that they can then there's going to be childcare expenses that need covering.

When you start to think about this is 2 or 4 times salary going to be enough? I'm sure you'll agree that it's very doubtful. In fact given all this even ten times salary is going to be a big stretch.

Our expat client's generous corporate package seemed ample initially. When we started to break things down he started to see that the employer's coverage could leave gaps.

The Temporary Nature of Expat Employment and Corporate Benefits

Expat assignments and employment overseas often come with inherent uncertainties. Employer-provided coverage is tied directly to employment continuity. This means that these benefits will stop if your employment status changes. For example if you change employers, get repatriated, or made redundant.

Even the most stable and generous expat packages can change due to economic shifts. If your company restructures, merges, gets acquired for example. Also if a country changes it's expat employment policies. Or it could go through political turmoil and economic stress.

Stability through Personal Policies

Our client had recently started employment in a new company with impressive benefits. However, we reminded them that expat life often involves unexpected changes. Retaining their own personal policy would provide essential continuity.

We used the Asian currency crisis as an example. Highlighting that things can change very quickly for expats when things go wrong. Maintaining his own life insurance policy kept his family protected regardless of employment.

Health Changes and the Risks to Future Coverage

One big risk with canceling personal life insurance as an expat is changes in health. This is because illness and health conditions will affect future insurability. Life premiums and insurability are set based on age, health status, and lifestyle habits. When you apply for cover all these factors get considered. Once the policy is up and running then they don't get reassessed. So if your health deteriorates your cover continues without interruption.

Protecting Your Future Insurability

Canceling a policy and reapplying later could lead to higher premiums or outright denial. You're playing Russian Roulette with your family's financial future. If you've experienced health issues while living abroad then this is a real prospect.

Keeping a personal policy ensures your continued cover irrespective of any changes in your health status. This really made our client think about his decision to cancel his policy. He'd got some family health history which could leave him exposed. He hadn't considered that he could be left without life cover. Though when we highlighted this he realised what an issue this could be for his family.

Coverage Gaps Across International Jurisdictions

Corporate insurance policies for expats often include limitations or gaps not immediately obvious. These may involve benefit caps, exclusions or reduced coverage as expats age.

Comprehensive Protection Without Borders

Maintaining a personal international life insurance policy ensures continuous cover. The cover amount remains tailored specifically to your cross-border financial responsibilities. Personal policies generally offer more straightforward terms and typically ensure tax-free payouts. With these going directly to beneficiaries, avoiding jurisdictional complications.

Customising Life Insurance for Expats' Unique Needs

Corporate-provided life insurance typically follows a one-size-fits-all approach. These are corporate policies that need to work for many people. These therefore limit flexibility to your individual expat needs. In contrast, personal life insurance gives cover suited specifically to your financial goals. Whether that's settling mortgage debt, funding education or ensure your family's financial security.

Tailored Coverage with Essential Riders

Moreover, personal policies offer riders like critical illness, disability protection, and premium waivers. These ensure that you can personalise your policy. So that it aligns with your expat financial planning and family security goals.

Cost Advantages of Keeping Your Existing Life Insurance Policy

For expats, personal life insurance premiums are usually based on health and age. These factors are considered during the underwriting process at the application phase. So, our expat client benefited from premiums fixed when he was younger and healthier. Applying for a new life policy later in life will mean that you're going to pay higher premiums. The risk of insuring you has increased so the cost of the cover goes up as well.

This is without any significant health complications. Throw some of those into the equation and we're looking at a big bump in the premium level. You can find out the impact of this from our post that we published last year.

Long-term Savings Through Early Lock-in Rates

By maintaining their existing policy, our client continued enjoying cost-effective premiums. They also kept that robust financial protection in place regardless of future circumstances.

A Real-Life Example: The Cost of Relying Solely on Corporate Benefits

We're sharing the experience of another expat client cancelling their personal life cover . They decided to rely entirely on employer-provided benefits and save themselves some money. Unfortunately, after this they were diagnosed with bowel cancer. Fortunately they caught it early and it responded well to treatment. They made a full recovery.

Several years later their contract wasn't renewed by their employer. This was because they didn't want to accept a hardship posting. They managed to find another position with another employer. Though this new company didn't provide any corporate benefits. They added an allowance to salary and expected employees to make their own provision.

This meant that they needed to replace the life policy they'd cancelled 4 or 5 years earlier. Unfortunately, their cancer diagnosis meant no insurer was willing to take them on. . The financial repercussions for their family were devastating. This case underscored the risk of relying only on employer-provided coverage for expats.

Secure Your Family’s Financial Future Abroad

Ready to ensure your family's financial security abroad? Get help from an expert navigating your life insurance tailored specifically for expats. Contact us today for a free consultation CLICK THE LINK BELOW!.

Ultimately, personal life insurance isn't merely about covering expenses. It's about making sure that your family has financial continued stability. Also it's about them maintaining this security wherever life takes you internationally.

By maintaining their personal policy, our expat client guaranteed uninterrupted protection. They locked in the flexibility, affordability, and peace of mind. Freeing themselves from reliance on uncertain corporate structures and international employment variables.

Consult with an Advisor: Avoid Costly Financial Mistakes

Unsure if your current coverage meets your international lifestyle? Reach out to us to discuss your unique needs and review your life insurance policies. Schedule your personalised review now. CLICK THE LINK BELOW!

This emphasises the benefit of ongoing discussions and regular reviews with your advisor. Situations evolve, and what at first seems beneficial might not be in your best interests. Talking to adviser can help you to identify that they don't align with your long-term goals as an expat. Which in turn helps you make better and more informed decisions for you and your family.

In this client's case, what appeared as an unnecessary expense became clearly indispensable. After considering their broader expat financial plan. We guided them to a deeper understanding of their specific needs. This prevented them from making a serious financial mistake.

If you're an expat considering changes to your life coverage abroad. Then our advice is to pause and speak first with an experienced advisor. Keeping a personal policy with corporate cover may be the most important financial decision you ever make.