Protecting your family finances

HSBC Expat

Protecting your family against life’s challenging surprises, such as job loss or serious or critical illness, is an important family finance priority for most expats.

Each year, thousands of families head overseas lured by a range of positive economic prospects and a better quality of life. The reasons to take you and your family abroad for an expatriate life are numerous, but it’s important to plan for, and protect yourself against, any unforeseen events.

Ensuring peace of mind

There is a wide range of policies on the market to suit every scenario. But how do you know what cover to take out, so you can sleep easy at night? Income protection, critical illness, life assurance, private medical insurance, travel insurance – the list is seemingly unending and what you choose will depend on your family circumstances.

“It’s imperative that an assessment is carried out, by either an international bank [with experience of helping expats manage their wealth] or independent specialist protection adviser, to avoid either over or under insuring,” says Christopher Wicks, director of Bridgewater Financial Services, who has worked in the industry for more than 25 years. “A lot will depend on whether you are moving overseas with a company or independently, being self-employed or retired for example. If you’re moving with your company, you should check the conditions very carefully to see whether you need to take out additional cover.” If you do not have the support of a company behind you, the responsibility sits squarely on your own shoulders.

In broad terms, the most important types of cover are: income protection, which provides you with an ongoing income – up to 75 per cent of the previous income – in the event of an accident or illness (international policies tend to limit the payments to two years); critical illness insurance, which pays a tax-free lump sum if diagnosed with a “critical illness”, and usually has life assurance included; life assurance, which pays out on death before an agreed date; and private medical and travel insurance.

Portability is key

Of course, many expat families move from one posting to another, meaning portability should be a big factor in planning protection for you and your family while overseas. Alan Lakey is an independent financial adviser based in Hemel Hempstead, specialising in personal protection. He says when living in high-risk countries, life assurance, critical illness cover and private medical plans can have restrictions relating to matters such as permanent and total disability. However, as Wicks points out: “It’s important that you keep your insurance company informed if you change countries as it may well have a bearing on the rate as well as the level and type of cover needed.” This could mean that you could end up having to change or update your policy every time you and your family move to a new country.

One option is to obtain an international or portable policy that can move with you. This is particularly important when it comes to life assurance and critical illness cover. This type of policy means that, wherever you are in the world, you can rest assured that your family will be taken care of if anything should happen to you.

Ensure you have the right cover in place

Ben Ewebank is Middle East director for recruitment agency Michael Page International and his wife Faye works for Morgan Stanley, the global financial services firm. The couple moved to the Middle East four years ago and have a 13-month-old daughter, Isabelle. They have prudently covered themselves for every eventuality. “We are covered through life and health insurance at work, and also have insurance cover for our mortgage,” says Ben. “We also have savings offshore – in the United Arab Emirates, if you lose your job, the bank freezes your account until you get a new job, so saving off-shore is critical.”

Of course none of us can predict the future, but it is best to plan for the worst and hope for the best – that way you can be confident of protecting your family, lifestyle and wealth. And planning includes considering keeping a property in your home country, or even something as simple as making sure all family members know the whereabouts of important documents such as insurance contracts, bank statements, tax returns and wills, in case of an emergency.

Seek expert advice

Sam Ebbs, a senior associate at Holborn Assets in Dubai, stresses the importance of seeking advice from either specialist insurance companies or expat-specific advisers in international banks. He also says it’s important not to put off taking out insurance cover. “You make the premium payment to an insurance company to either give you a choice in the event of a critical illness or disability, or your dependents a choice in the event of you dying,” he says. “With the appropriate cover in place these events, although life-changing, do not have to be financially crippling on either you or your dependents left behind. It is about putting the right money in the right place at the right time.”

He gives one example where he was advising a couple with a family about whether to add life and critical illness cover to their planning. They went through the details but the husband was in the middle of a big project and was unable to finalise everything. Unfortunately, shortly after these discussions, the husband suffered a major stroke and was incapacitated, forcing the family to return to their home country.

Wherever you end up residing, you should check that you have the right, portable cover in place for you and your family, and continually review your needs with the help of specialist expat advisers. This way you can play an active role in determining your family’s future.