Your Life Insurance Fails, What Happens To Your Family?

What We're Looking At Today!

In our last two posts we've looked at a serious financial issue faced by an overwhelming number of expats. And it's the result of the fact that many life insurance policies don't provide cover after moving country.

We'll do a quick recap in a moment...

Before then we want to quickly touch on the topic of today's post. Which is the impact that having a life policy decline a claim would have on your family.

The reasons why you have life insurance in the first place and what it would mean if those funds weren’t available.

Before that here's that here's that quick recap we just mentioned.

Here's A Quick Recap

It's very understandable why so many expats get caught out by this situation. It's so easy to get lulled into the false sense of security that you have life insurance.

After all, when you sent a change of address notification, they didn’t raise the issue of your cover ending. They acknowledge the change in your details and say nothing more.

Not only that they keep on collecting the premiums for your life cover, so why on earth would cover have stopped.

It's crazy, right?

The chances are, you're paying for something that isn't going to do what you want it to do when it's most needed.

In fact, you're paying for something that is going to make the lives of the people you love more stressful- at the very time their lives are already full of stress and worry.

As we've mentioned there's only one way to find out if your life insurance still covers you as an expat.

So, we've put together a FREE "Expat Life Insurance Confirmation Pack".

This gives you everything that you need to be 100% sure whether you've got cover or not.

To get your copy, CLICK BELOW now!

The Reasons You Have Life Insurance

Let's start this off by exploring the reasons for you having life insurance in the first place. After all you don't have it just for the sake of having it, you've got life insurance to fill a need.

Whether you know it or not!

So, what are the possible reasons that you've got a life insurance policy.

Here's the list:

1.    Replace Income

2.    Pay Off Debts

3.    Cover Education Costs For Kids

4.    Pay Estate/Inheritance Taxes

5.    Provide Liquidity

Why don't we take a look at them one by one and the impact that it would have if the money wasn't available.

Replace Income

So, you may be the main breadwinner in your family. As with many expat families it's not always easy for both partners to work.

Visa requirements can complicate the situation and mean that only one of you gets to work.

It may have been different in the past with both of you having careers, though right now that's not the likely situation.

So, if the unthinkable were to happen and your family were to lose that one source of income, it’s going to have an enormous impact on them.

Now, you may have savings, though they're not enough to replace the income that's been lost.

If you both worked when you were back home, then you both might have life insurance.

If not then you might have only set up life insurance to cover your income.

In either case, now that you're an expat there's a big risk that this/these policies won't pay if a claim is made. In fact, it's at least an 80% chance that the policy isn’t going pay out in the event of a claim.

The emotional loss that your family face would now be compounded by a massive financial loss. It's hard to think this could only be devastating for them.

They're now struggling financially and have an enormous amount of uncertainty ahead of them.

It would also most likely mean that they face a significant drop in living standards as well.

Your partner faces some harsh choices, especially when there's kids to feed, clothe and educate, raising children is both demanding and expensive.

Piled on top of that is the stress of struggling to pay for everything. Things can become unbearable.

Your life insurance should help end this worry by replacing the income that's been lost with you.

So, if it doesn't do that for your family then there's going to be severe consequences for them.

You get that, right?

Pay Off Debts

Mortgages, credit cards, car loans or any other kind of debt for that matter doesn’t stop when someone dies.

Lenders still expect to get paid even after you’re gone. The responsibility for those payments falls on those that you leave behind.

How long would your family be able to do this if your income stopped?

What would be the financial impact on them?

These are questions that you shouldn't need to answer because you've got life cover.

Though as you now know becoming an expat means that they need asking again.

Once more, it's not only about the financial impact that having your life policy fail causes. It's also the emotional impact and stress your partner faces as they struggle to make debt repayments.

They don't have your income to rely on, so where do these resources come from?

You might think that a way of dealing with your mortgage is to dispose of the property then pay off that debt.

Though, selling a property isn’t a quick process.

Even when the property market is good, you’re looking at six months minimum to complete the sale. When things are slow then you could be looking at years before that property gets offloaded.

In these market conditions, the price that they get could also be much lower than they expected.

In the meantime, if they can’t finance the debt then there’ll be penalties accruing on the mortgage. If that situation persists then there's a possibility of foreclosure on the property.

Depending on how the property ownership is structured, your estate may need a grant of probate before they’re even allowed to sell it.

Unfortunately, this isn't a quick process either.

We’ve seen it take 18 months for estates that have been straightforward to clear probate. The deceased had an effective will in place and nothing was being contested.

Yet, it still took this long for probate to complete.

All this time your family must find the money to keep paying the mortgage.

They'll have been through enough without having to deal with this as well.

Especially when you consider that you've been paying for a policy to prevent this.

Cover Education Costs For Kids

You may have decided to save for your children’s future.

Whether this is to help with tertiary education cost so they don’t get saddled with student loans.

Or you may just want to give them a solid start in their lives.

The fact is you wanted to save to give them something and you’re making the effort. You might be putting money away each month or larger chunks on an ad-hoc basis.

It doesn’t matter how you’re doing it, just that it’s important enough to you, to do it.

So, here’s a question for you…

As of today, have you saved the amount that you wanted to give them?

Are you even close to reaching that target?

Is the answer’s no you've got some way to go before you get there, then here's another question for you...

If you couldn’t save anymore, how far would those savings go?

You've got an objective in mind so, how much would the current value of these savings cover those costs?

One way of making sure that this money is available for your kids even if you’re not is by using life insurance.

You've already dealt with this and factored it into your existing policy. And included it in your life insurance benefits total.

So, once again what happens if this life policy doesn't pay because you live in a different country now?

Those well laid plans get thrown into crisis...

It's another financial worry that your partner will be facing.

Especially if this was to help fund your kids university fees. Now, they'll have to take on more debt.

You've taken the steps to make sure that this money would be there for them and then it isn't.

So, you see how important it is to find out whether your life insurance is going to pay out?

As we've explained already there's only one way that you're going to find out about this.

That's why we've put together a FREE "Expat Life Insurance Confirmation Pack". This gives you everything that you need to be 100% sure whether you've got cover or not.

To get your copy, CLICK BELOW now!

Pay Estate/Inheritance Taxes

Today, we're not going to get very technical on this topic. We're not going to talk about spouse-to-spouse transfers because this isn't what this post is about.

We're only looking at the impact that a policy not paying out would have on you.

So, if you've got a policy to pay estate taxes you already recognise that you've got an issue.

Depending on what you have...

Where you have it...

Where you originate from…

And also where you’re living right now…

All this determines whether your estate is going to be subject to taxes.

Estate and inheritance taxes are all the same thing. They work in the same way, the only difference is the rate that's levied on your estate.

After deducting allowances, estate taxes are anywhere between 4 & 80% of the net asset value.

Your estate could be subject to these taxes in more than one place. This is also something else that's changed since you became an expat.

It could be in your country of residence at the time. There may also be claims in your country of origin or the country where an asset is located.

It might even be in all of them.

Some of this you may be aware of already, after all you've taken steps to mitigate this tax with life insurance.

If that policy doesn't pay out, then your family could find themselves in a very tricky situation.

As we've highlighted already that situation may well be more complicated now you're an expat.

After the deduction of allowances anything above the relevant threshold is charged. This will be at the prevailing rate in the location where the tax is being levied.

These taxes need settling before an estate gets released. This means that your family must get this money together before they can access the assets.

If they don't have those resources, then the estate will be stuck until they do. Again, this is why you set up that policy in the first place.

So, they're back to square one!

“What’s the big deal?” you might be thinking. “The estate sells some of the assets and then pays the taxes. There’s more than enough left over”.

Makes sense, right?

So, here's the thing!

Generally, these taxes need settling before the assets are allowed to be sold.

Estates remain frozen until the tax authorities give them the all clear. Until that point, they're unavailable to the beneficiaries of the estate.

Some countries allow them to use cash holdings to clear these tax liabilities.

Though you might not have enough cash reserves to clear such sizeable tax bills?

The money isn't available because that's what the life insurance was for.

They can't sell the assets so what are their options now?

They could borrow the money...

Though this can prove to be very expensive because it could still take a while for the estate to clear probate. Even after estate duties have been paid.

If the bulk of the value of the estate is in property assets, then these will need to be sold. They could be refinanced though if the income isn't available to do that then it won't be an option.

If selling these assets is the only option to pay the taxes. Then this may take some time to complete also. All the while interest will be accruing on that loan.

Life insurance is by far the best options as I'm sure you'll agree.

Making sure that your policy still does what you intended it to do is important. That's because the upheaval it would cause to your family would prove very taxing (pardon the pun).

Provide Liquidity

I'm sure that you appreciate the fact that you can be wealthy, yet you’re cash poor. You’ve got assets and no liquidity.

So, one other reasons for you having life insurance is to make sure that your family have liquidity. If they've lost your income, then the proceeds from your life policy gives them some time to think.

It gives your partner options!

So, if your policy doesn’t pay out what are the implications for your family.

As we’ve already mentioned there's a chance that your family might have to wait to get access to your estate.

You might view your primary residence as your main investment and have a big proportion  of your wealth tied up in it. If that's the case, then that property may need to be sold to release capital.

Again, they’ve lost your income, and they need to replace it. If there’s no alternative, then that means selling assets.

As we mentioned in the debt section, selling property can take some time.

So, what do they do in the meantime?

If they're desperate enough and things are taking too long, what could they do?

One option is to drop the price significantly to see if they can get a quick sale.

This means that they could end up with much less than they should have. All because they don't have choices and the liquidity that the life insurance gave them.

If you know that your life insurance policy isn't going to work for you anymore. Then you can take steps to remedy that by replacing it.

The first step is to find out exactly where you stand!

To help you do that get your FREE copy of our "Expat Life Insurance Confirmation Pack". Everything you need to make sure you've got life insurance that meets your expat life.

CLICK BELOW To Get Your Copy Now!

Summary

In a moment we’re going to give you a quick summary of today’s post. Before that though we want to take a look at what we’ll be dealing with in next week’s post…

We’re going to look at how exactly you can get life insurance that works for your expat life.

No need to worry about changing countries.

The things you need to be aware of.

The most common mistakes people make and how you can avoid them, plus so much more.

Now here’s that summary for you

You've done the right thing and got life insurance. That's good financial planning.

Moving to another country now means that there's a risk that your policy won't work. This puts your family at risk and after all, your protection planning was for them.

You can find out now or you can do nothing, and your family will find out when it's too late.

Whatever your reasons were for having life insurance in the first place, you still need it.

So, get our FREE "Expat Life Insurance Confirmation Pack" so that you can have peace of mind, knowing that your family's protected!

CLICK BELOW To Get Your Copy Now!

Thanks for reading!

We’ll be back with your next week…

When we'll be looking at how you can make sure that you've got effective life insurance for you and your family as expats!