When it comes to financial planning, people normally put their priorities in a certain order. The common first objective is to clear debt, followed by keeping adequate cash and then thinking of saving money and investing for the long-term.
However, any financial advisor worth their salt will tell you that the top priority before you consider saving and investing should be life insurance and income protection.
If you view your wealth as being there to take care of both you and your loved ones then what could be more important than ensuring that they are financially protected should something happen to you?
Life insurance needs change radically during the financial planning life cycle.
For example, if you are a young graduate starting out in the world of work you will probably have little debt (apart from a student loan possibly), no financial dependents and therefore very little need for life insurance.
However, after a few years working you need a mortgage to buy your first property and suddenly you find yourself with a liability to cover. Some lenders will even insist that you have life insurance or decreasing term insurance in place to repay the loan should something happen to you.
Once a family comes into the picture then your life is no longer just about you! If you become either the sole or main the breadwinner then the need for life cover grows even more along with a sense of moral duty. You might not mind dying and owing the bank money for your house but the thought of passing away and leaving your family struggling to make ends meet is unthinkable!
In retirement life insurance can even be used as part of an estate planning strategy, to reduce an eventual Inheritance Tax liability.
The amount of cover you need changes through the course of your life as financial circumstances and objectives change. The amount of cover actually required is therefore more complicated than it may seem to calculate.
You can find many life insurance calculators available online, but you should actually consider how much the premiums would be given your circumstances and realistically how much of your disposable income you can commit to life insurance, while also bearing in mind other financial planning objectives.
For this reason life insurance should be an integral part of the financial planning process.
An observation we have made is that in general fewer people living and working internationally have life insurance than those living in the UK. We believe this is due to cost and ultimately the availability of life insurance to those working living overseas – especially those in more exotic locations. Financial planning in general is often neglected by expats and internationally mobile professionals who find it difficult to access good advice where they are have a generally more changing lifestyle.
In the UK having life insurance of some description is the norm and it is actively encouraged by the Government. As a result, there is a competitive life insurance market which ensures the availability of low cost life insurance policies of various kinds.
In the international market this is quite different as expats have often found life insurance to be extremely expensive in comparison to UK rates. This can be partly explained by differences in risk associated with living in certain countries, while the UK, in contrast, is considered relatively safe.
This is not the whole story, however.
Aside from the risk factors of living in some foreign countries, it is also the lack of providers who operate in the international market and policies which are generally more expensive than their domestic equivalents.
There has also been a propensity to sell policies which build an investment value. Frankly, these are largely favoured by commission-hungry salesmen who flog them by the dozen so they can hit their targets and qualify for the company’s incentive trip to Las Vegas. Such policies do not offer good value as either life insurance or regular savings vehicle, so have been a lose-lose in most cases for the policyholders. In all our years of meeting expats we are yet to see a savings plan that has proved to be worthwhile for the client.
There is good news however as the tide is turning and as international life insurance providers are beginning to offer good value life insurance policies of various types to people living and working internationally.
As independent financial advisors our advice is UK-regulated and we operate a model of complete transparency. We won’t ever recommend a product simply because it lines our pockets, but only because it is truly the best solution for the client. We are part of an established UK group that has an impeccable 20 year record of innovation and putting clients first.
If you have any existing policy it would be worth reviewing your cover and premiums to compare with the options now available.
We’ve made it even easier for you to assess your options. Simply complete this form and we’ll get back to you within 24 hours with a quote.