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 possible, but the circumstances continue to be relatively limited and reinforce the need to review your circumstances prior to leaving Australia.
Currently, Australian life insurers will consider extending cover to Australian citizens and permanent residents if they meet the following criteria:
- The expats are not resident in a country which is regarded as 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.
- There is a clear, demonstrable intention to return to Australia in the short to medium term; precisely what this means can vary, but it typically means within the next two or three years, and
- Insurers also currently require that any documentation is signed in Australia, so it would not be possible to initiate cover until your next visit to Australia. We haven't yet managed to convince life insurers to accept documentation signed in Australian embassies or consulates as an alternative but there are some signs of increasing flexibility
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.
Note that your existing Australian life insurance may continue to provide cover while you are overseas, but this should be confirmed with your insurer in writing before you proceed overseas. There are a number of situations where cover may not continue if you are non-resident or it may expire, in the case of cover within super, if no superannuation contributions are made for a certain period in time - which is typically the case with expats.
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.
