Challenges for Americans abroad (Part 4): Insurance for US expats
Written by Joseph Regan on September 27, 2016.
Just like many other financial planning issues, insurance for US expats can be a real pain in the neck.
To recap, Part 1 of this series spoke about the difficulty Americans abroad face while making smart investments, and the solutions available to avoid a catastrophic long-term investment decisions. Part 2 covered the issue of frozen IRAs and pensions – some of the biggest pension providers in the US will freeze your retirement accounts the minute you move outside of the States. Ditto for Part 3; many of the biggest banks in America will cancel your account once you relocate, while many other foreign banks in the world will not take on US passport holders as clients.
The final part of Challenges for Americans Abroad follows the trend of explaining how your domestic US medical and/or life insurance provider will terminate your policy once you move to a new country, even if it’s just for a temporary assignment. While many jobs will cover you with some kind of coverage abroad, many do not, and often the coverage they do provide is not substantial.
I spoke to a young American couple the other day and they explained that their life insurance policy was canceled because the husband’s company relocated him to China. They were not worried, however, because the husband’s company provided a death in service benefit, which they assumed was the same thing as life insurance. Death in service is a common component of the expat package, but it usually only pays out three to five times your yearly salary if you die while working for that company abroad.
There are many problems with death in service benefits. For one, three to five times a yearly salary is usually not a large enough sum assured to provide for a family. Living expenses, college fees, etc. adds up quickly.
Secondly, death in service usually only covers the employee of the company and not the spouse, leaving the spouse uninsured. Furthermore, if you leave that company or get fired, your death in service will end as well, leaving you uninsured.
Third, if you live abroad and your insurer never finds out (i.e. cancels your policy) and you pass away, the insurance company could very well not pay out the sum assured since you had a foreign address. This is definitely a risk you don’t want to take.
Fourth, if you start your own business, work as a freelancer, or work for a company that does not provide these insurance benefits, you’re going to be left in the dust unless you take action.
Lastly, when you do return back to the States, you’re going to have to buy a whole new insurance policy several years later. Life insurance is age sensitive – meaning the yearly premium increases every year you get older. The earlier you purchase an insurance policy, the cheaper.
To make matters worse, all the dilemmas associated with life insurance can be applied to medical insurance as well – a true double whammy!
The good news, however, is all these problems are easily solvable. If you’re an American living abroad with an existing life and/or medical insurance policy, it’s best to ask them if it covers you outside of the 50 States. Likewise, if your company says they will provide a new policy while working abroad for them, it’s a good idea to get the complete details to see if it’s adequate for you and your family’s needs.
It’d be highly recommended to consult with an American financial consultant to discuss specific insurances for US expats. Furthermore, expat related policies will not only sufficiently cover you while you’re abroad, they will also protect you when you return to the US. As you can see, insurance for US expats is perfect for the family on the move.
To get a free quote, or to get a review of your current company policy to see if it’s sufficient, don’t hesitate to get in touch. You can email me at email@example.com, or call me at +86 152 2182 4499.