Life Insurance: Options available to Expatriates
The Current Status: Life Insurance for Australian Expats
At this point in time, no Australian life Insurer is prepared to provide individual life insurance cover to expatriates. In the past, Insurers have declined to provide cover where expatriates have been resident in countries where the Australian government has advised citizens “not to travel or reside”; referred to as DFAT level 4. With effectively all countries outside Australia now falling into DFAT 4 insurers have taken the approach of refusing cover for anyone outside Australia.
More remarkably, we are finding cover refused if there is any intention expressed to travel outside Australia, whether permanently, for business purposes or for tourism - even though Covid 19 related illnesses would be specifically excluded in any cover.The Australian, and indeed worldwide, life insurance industry has come under enormous pressure as a consequence of Covid 19 and we hope that many of the above changes represent a short term response, with conditions hopefully more flexible next year. In any event, what is clear is that premiums will rise in the short term and any unusual risks will either be excluded - as is the case for expats - or attract significant additional costs. The only option available to expats may be to pursue cover through local Insurers - whether this is a real option will depend on your country of residency.
The commentary below summarises the pre-Covid 19 options in terms of arranging life insurance for Australian expats - hopefully we will return to this situation in the medium to longer term. The comments in relation to host country or international life insurance remain generally applicable.
1. Australian Life Insurance
Obtaining life insurance cover for Australian expatriates from Australian insurers is usually possible except in situations where the country of residence is considered unduly "risky" - with insurers often relying on the country travel warnings issued by the Australian Government (Department of Foreign Affairs and Trade - DFAT) to make this judgement.
Until relatively recently, we had noticed a growing preparedness by some Australian insurers to extend expatriate coverage on very reasonable terms - and arranging cover by Australian insurers is usually the most appropriate and cost effective course for Australian expats and should be the first option pursued.
However, during 2019 we noticed that arranging cover became markedly more difficult, particularly in terms of many insurers being unprepared to cover "long term" expats or where there wasn't a clear, evidenced intention, to return to Australia in the "short to medium term".
The next question is then whether it make sense arrange to cover through your superannuation fund or directly - and that advice is provided on a case by case basis. As we mention elsewhere, your existing Australian life insurance may continue to provide cover while you are overseas, but this needs to be confirmed with your insurer in writing before you proceed overseas.
Also bear in mind that life insurance cover within superannuation is often attractive in Australia because premium rates are sometimes, but not always, lower than those available directly from insurers on an individual basis. However, both the premium levels and the precise cover made available are subject to regular renegotiation with insurers - and we don't believe this provides adequate security for expatriates.
2. "Host" Country Life Insurance
You can seek life insurance cover in your host country from a reputable firm. This may be the preferred solution if you are likely to remain in the host country for a very long period of time, even perhaps permanently, and your future costs are likely to be in the local currency. If, however, on any premature death the family’s long term costs are likely to be largely Australian dollar related (for education, housing, support) then you are taking an exchange rate risk and, in some countries, your family’s ability to transfer any payment out of the country. Additionally, in developing countries, the local premium rates are likely to reflect lower life expectancies and higher country risk.
3. International Life Insurance
There are circumstances where it may be appropriate to consider international or offshore life policies. These are policies issued outside of national jurisdictions and are available in a range of major currencies. If you intend being overseas for a number of years these may be a good fit, but this should be the subject of discussion with a professional adviser to ensure that they fit your personal circumstances and that there are no untoward tax or other consequences.
Carefully review the premium rates against alternatives (they can sometimes be high) and consider the possible impact of any currency movements on both premium payments and final payouts. Policies of this nature are often sold as "pseudo" investments offshore and considerable care is recommended.
If you would like to arrange professional advice please complete the Inquiry form below providing details and you will be contacted promptly.