Life Insurance: Options available to Expatriates
Ideally you would have reviewed your life insurance requirements before moving oveseas but, if you are an Australian seeking life insurance while already resident overseas, you have three broad options:
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 have noticed that arranging cover has become 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 often 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 more Australian dollar related (for education, housing, support) then you are taking a potential risk regarding exchanges rates and, in some situations, 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 it should be the subject of discussion with a professional adviser to ensure that they meet your personal circumstances and that there are no untoward tax or other consequences. Also 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 care is recommended.
Exfin provides access to advisers who can provide specific advice in relation to whether coverage is available through an Australian or International insurer, the quality and extent or any cover offered and applicable premium rates.