Whether you are adequately covered now, or have no insurance coverage at all, moving overseas may be one of the triggers for you to seriously look into your options. Nevertheless, it is also one of the areas that you are most likely to ignore when you plan your move. In the third installment of this series, I’d like to answer the question many of you have – what to do with insurance when I move overseas?
Before we go into the specifics, let’s have a quick overview of what insurance is. Insurance is a type of contract that allows us to transfer some of our financial risks to others.
These risks usually come from events that are not very likely to happen, such as dying from an accident, losing your house in a fire, or contracting a rare disease that requires expensive treatment. However, when they do happen, the financial consequences are great. They may either wipe out your current or future income, assets, or take a lot to replace.
Fortunately, these events don’t happen to everyone all the time. Therefore, if enough people get together and share the risks through the form of paying into a group fund in advance, when someone in the group encounters financial catastrophe, the fund can cover the needs.
Insurance companies operate these “group funds” with an extra profit motif. They have enough customers so they are able to charge you a premium that is small relative to the potential pay out. The lower the risks, the less insurance companies need to charge you to make a profit.
As you can now see, the insurance companies are in the business of calculating risks and charge a premium that is worth it for them to take the risk. The more they are able to confidently quantify the risks, the more likely they are able to insure you and charge a reasonable premium commensurate to the risks.
As it happens, most insurance companies are more comfortable quantifying risks they have more data on, such as events that happen locally in your city, state, or country. It’s less likely they know how to charge you to compensate for the risks they take if you move overseas, and sometimes frequently to multiple countries.
So it is within this context you should think about what insurance options are available to you and how much you should pay for it. And most importantly, why your current insurance may not cover you when you move.
If you purchased the policy before you ever had intention to move overseas, and the policy is currently in force, it is likely it may stay in force as long as you continue to pay the premium.
This means practically, you likely need to maintain a US bank account so the insurance company may draw the premium from it. Of course, if it’s a paid up policy, then it’s not an issue.
Even if you pass away while overseas, the insurance company will pay out to your beneficiary as long as the legal death certificate is presented. However, it is also likely they will only issue a check that is drawn on a US banking institution. If your beneficiary does not have financial ties in the US, it may take an intermediary step to send the proceeds overseas.
Nevertheless, you should check the policy contract to see whether certain countries or events are excluded.
For example, some policies may explicitly exclude acts of war. If you are moving to a country with risks of war, you may want to look for a new policy.
Getting A New Policy
If you are looking to get a policy before your move, you will need to disclose the information about the move overseas on the application. You likely need to disclose the location, expected time frame, the nature of your move, and what you will be doing there.
Based on the company’s underwriting guidelines, you may or may not qualified for the best rates, or at all, depending on where you are going. So I highly recommend you work with an insurance broker that has access to multiple insurance companies to find the best one for you.
If your move is permanent, it’s not impossible to get a US policy. However, depending on where you are going, you may also want to consider getting a policy in your new country. Some US insurance companies may not bill or correspond with a foreign address, so you may want to take that into account.
Lastly, if you likely will move from country to country frequently on assignments without truly staying long-term in one, you might want to consider policies designed to cover your line of work. It’s likely there will be riders or coverage that are more suitable for you. Again, consult an insurance professional that works with multiple carriers.
Since life insurance generally requires medical underwriting, you may need to return to the US to receive it. Furthermore, most insurance companies require you to be in the US when the policy is delivered. It is possible to go through everything in a few weeks if you wish to do it when you return to the US temporarily, but it requires proper planning in advance, since you can’t really predict how long the underwriting process will take. Definitely work with a professional on this.
Again, in some cases it might make sense for you to look for options locally, especially if you do not expect to return to the US permanently. Just keep in mind that if you acquire a policy that has cash value overseas, you may need to report it as a foreign financial asset.
Many people in the US have access to the disability policy through work. If you will continue working for the same employer overseas, check with your HR that these group policies do not have a specific exclusion for out of country employees. In addition, understand in advance whether you will be able to claim while residing overseas. And if not, whether your US employers will make arrangement to transfer you back should you become disabled.
For the minority that actually purchased an individual policy that is still in force, you should check in your contract and with the company to understand whether the policy will cover your overseas employment. And if it does, how you will be able to claim from overseas.
Standard disability insurance carriers could require you to live in the US the majority of the time in a year to claim, or return to the US before you may claim.
Getting a new policy
If you are still in the US, it is still possible to get a standard disability policy, as long as the requirements for claiming benefits is acceptable for you.
If you are already overseas, generally your option is getting worldwide disability coverage, which costs considerably more. However, you may not need to return to the US for medical underwriting, since it’s for worldwide coverage. I recommend going through a broker specializing in international policies if this is the route you take.
On the other hand, a local disability policy may work for you if you intend to reside in country should you become disabled.
Depending on where you go, this might be an area that is less of your concern. In many parts of the world, health insurance or cost without insurance is much more affordable. For routine medical expenses, it may not require an individual policy.
However, there are two situations where you might consider getting international health insurance.
- If the places you are going to do not have adequate medical care, you may want to purchase international health coverage that includes medical evacuation services. When you are already sick, your options may be more limited if you don’t have the resources.
- In some countries, routine medical care is affordable out of pocket, but quality care for serious illness may cost substantially more, or non-existent. If you think you may not want to get treatment in the country you live in, you should consider international health insurance that allows you to decide where to get care.
It is also still possible to buy individual health insurance coverage in the US to cover medical expenses overseas. A few insurers deal with foreign hospitals directly, but most that take overseas claims may require you to pay out of pocket first and then get reimbursed. Nevertheless, you should work with an agent to identify one that works for you. If you will be able to pay out of pocket on routine medical expenses, it is likely that an ultra high deductible plan may work best for you, which also comes with the benefit of allowing you to save extra in a tax-advantaged Health Savings Account from your income above exclusion level.
Lastly, note that the Affordable Care Act requires every US tax resident to carry health insurance (although the requirement is now repealed under TCJA beginning 2019.) It doesn’t mean that it has to be a US policy. As long as you have coverage, even under a free-for-all public system in a foreign country, you meet the requirement.
Personal Property and Auto Insurance
If this is your first international move with household effects, you will find out the many pros and cons with this type of move. The pros include having your things with you wherever you go; the con, unfortunately, includes forever losing them due to theft or damage during transit.
While you cannot replace the significance lost, transit insurance may help you recuperate some of the cost to replace items. It’s up to you to decide whether the value of your shipment is worth the insurance.
For things you do not take with you and keep in storage in the US, there is also an insurance coverage for that. Do not assume the storage facility will cover the damage. Read the contract carefully.
When you actually receive your valuables in your new country, you may want to consider insuring them locally, like you would in the US through auto, renter’s or homeowner’s insurance. It is possible the rate you receive locally may be more favorable than insuring all of your possessions on a worldwide coverage basis. However, this requires you to be diligent and switch insurance providers whenever there is a move.
A note in the end
My intention for this post is allowing you to think about the types of insurance you may need when you move overseas. You might find it slightly frustrating that I did not provide any sources to begin the search for an agent. However, I do not want to appear to promote one company over another.
In addition, there is one major insurance that I have yet to cover here – liability insurance. This is because I personally, perhaps like you, still have very limited understanding how liability insurance marketplace works in a global context. Once I become more educated in this realm, I’ll return to edit this post.