The question about whether or not life insurance is worth the money comes up frequently during expat financial planning discussions.
Some expats feel very strongly that buying life insurance is something that is just not worth it, while others (not just the insurance companies!) see it as the foundation of a good financial planning strategy.
Here’s my take on it. . . .
I’m going to start with a quote, because for some reason, it always springs to mind whenever I think about life insurance.
“On a long enough timeline, the survival rate for everyone drops to zero.”
You may well recognize these words immediately, but if you don’t, they’re from Chuck Palahniuk’s short novel, “Fight Club” and made by his unnamed protagonist, who is simply known as ‘The Narrator’.
In the later film adaptation, ‘The Narrator’ is played by the excellent Edward Norton. If you’re not familiar with the book or the film, both come highly recommended!
Here’s a short clip of the scene I’m talking about, in case you’re not so familiar with it.
The quote (and this scene in general) is a great reminder that we’re all mortal and although most of us are aware of this fact, it is not something we necessarily get a chance to stop and think about so often in our increasingly distracted, task-orientated, target-driven, fast-moving lives.
Other stuff always seems to get in the way.
What’s more, none of us really want to think about our own deaths. It is seen as morbid and I know some people feel that by the very act of even talking about their own death, it somehow brings that final day closer!
But I tell you this, if you have loved ones that depend on you financially, you’d damn well better make sure you’ve thought about it.
Ask the question:
“What will happen to them if the unthinkable happens to me?”
On top of that, what if you suffered from a critical illness or condition, like a heart attack or stroke, that meant you didn’t necessarily die (at least, not straight away) and were unable to work and had to rely on your family or other carers to look after you?
Could you and your family survive financially?
These are tough questions, no doubt.
Nonetheless, they are questions that need to be addressed within your financial planning and in order to give you the peace of mind that your loved ones are protected, taking out a life insurance policy may be an appropriate option.
Due to the fact that life insurance is inherently associated with death (yeah, it should be called ‘death insurance’ really, but I think that would make it even more difficult to market!), it’s a topic that can make people uncomfortable.
And I’ve heard many ill-advised arguments over the years against buying life insurance, some of which are outlined in this excellent article here.
Granted, if you are either young, single and/or without children, or if you’re super-wealthy, there is not often a significant need for life insurance (although there are other reasons why it might be useful, such as for estate and tax planning purposes).
The bottom line is though, if you have dependents (and that could include your children, spouse or even elderly parents) and/or you need to protect your business in the event of your death, you should have some form of protection place.
It will never happen to me
Unfortunately, death will happen to you at some point (see quote above), but you may have never thought about premature death or critical illness and the burden that may put on your loved ones.
Here are some sobering statistics to highlight just how common critical illness and premature death is.
- 1 in 6 people around the world will have a stroke in their lifetime
- Every five minutes someone in the UK has a stroke
- One in five strokes are fatal
- 25% of strokes occur in people under age 65
- In 2010 stroke was the fourth largest cause of death in the UK after cancer, heart disease and respiratory disease
And of those who survive a stroke:
- 42% will be independent
- 22% will have mild disability
- 14% will have moderate disability
- 10% will have severe disability
- 12% will have very severe disability
- 1 in 6 males and 1 in 9 males died from coronary artery disease in 2011
- Every 5 minutes someone in the UK has a heart attack
- More than 1 in 3 people in the UK will be diagnosed with some form of cancer in their lifetime
- 1 in 35 men and 1 in 20 women will be diagnosed with cancer before age 50
- 6 months is the average time people take off work to recover from chemotherapy and radiotherapy, after a diagnosis of cancer
These statistics speak for themselves, so if you’re neither young, single or super-wealthy, then I think there is definitely a decent case for considering life insurance and with dependents to consider in the event of your death, life insurance could not really be considered to be a waste of money.
I think the question of whether or not it is a waste of money is only really a question if people are sold life insurance when it is not appropriate to their situation, or if people that could benefit from having life insurance, but are sold the wrong type of life insurance. Then it may be considered a waste of money.
Another point to remember about life insurance is that it is not an investment – it is a strategy to cover potential economic loss.
Don’t Delay – Act Now!
Many expats are lucky enough to have this kind of benefit tied into their salary packages. But if you’re not one of them and you have dependents, start with the simple question:
“If I die tomorrow, would that negatively impact on anyone financially?”
If the answer is, “Yes”, then you need to look at taking out a life insurance policy.
Life insurance is really one of those things that you should not procrastinate over, not just because it leaves your loved ones vulnerable, but also because the older you get, the more expensive it becomes and taking out an insurance policy when you are young allows you to lock in lower premiums.
Don’t delay – get on it today.
Some more great posts on Expat Financial Guy.