Income Protection Insurance for British Expats

Income protection insurance is widely overlooked by expats, but has some extremely rewarding qualities, certainly making it something to consider when looking at insurance options as a British Expat.

Below is a breakdown of exactly what Income Protection Insurance is, what it can provide for you and what to do in order to apply for it.

What is Expat Income Protection Insurance?

In a nutshell, Expat Income Protection provides people who live abroad with an insurance cover that will provide you with a regular income in the event that you become too sick or injured to continue working.

It provides you with a percentage of your usual monthly salary, and in the event of your death, provides your chosen beneficiary with a lump-sum payment.

The salary payment amount continues through until you are well and able to continue working as usual (or until you reach retirement age).

This continuous regular payment will be made after a deferral period of around either 3, 6 or 12 months. Monthly premiums are typically cheaper when the deferred period has been longer.

When choosing this period, savings, emergency funds, annual leave and sick leave should all be taken into consideration, to avoid being caught short.

What percentage of my monthly salary would I receive?

The percentage you receive of your monthly salary has been calculated in the past based on both the type of insurance policy that was chosen, as well as the level of premium you pay toward it.

However, this amount will mostly always fall within the 50-75% bracket of your usual monthly salary.

Should I consider getting Income Protection insurance?

There are of course some British Expats who would benefit substantially more than others from this type of security. These would be:

• Freelance workers
• Expats that have dependents and/or family members that solely rely on the income they earn monthly
• Expats who are self-employed
• Expats working for a company that has not provided them with a similar cover within their contract of employment

If you fall into these categories, it is by no means essential that you have to pay for this type of insurance cover.

It is more about the fact that you will have much more reason to try and understand your options and know that this is something that could potentially provide support for you and your family when you cannot yourself.

With the Covid-19 pandemic providing significant health uncertainty, Income Protection Insurance has become an increasingly sought after insurance, but expats are not often aware that it is available to them.

How does income protection cover differ from my contractual sick pay?

If you do not fall into the listed groups of individuals above, and you are contractually promised to be paid Statutory Sick Pay (SSP) within your employment contract, it is vital that you understand the key differences between these two types of ‘safety net’, before making the decision that this type of insurance is not for you.

Put simply, Statutory Sick Pay will always have a cut-off point.

It will only be continued over a limited period, which is unfortunately quite often less than just one year.

SSP cannot provide a financial solution to any long-term injury or illness that you may incur, rendering you exposed to potentially serious problems.

Types of Income Protection policy to choose from

There are two main types of Income Protection policy. These are:

• Indemnity value policy
• Agreed value policy

Although some people still hold Agreed value policies, these are no longer offered to new customers.

These were stopped on 31^st March 2020 due to it coming to light that the costs they caused toward the insurance companies had become completely unsustainable.

An Agreed value policy meant that you were agreeing to and securing a percentage when you signed up for your policy.

These tended to be the more expensive of the two options, but ultimately meant that your salary percentage was ‘locked in’ (based on what your salary was at the time of signing your policy), regardless of whether your salary changed or decreased in the future.

This tended to be the much better option for expats that had a fluctuating annual income year to year.

An Indemnity policy does not secure a percentage based on your salary at the time but has more of a ‘rolling contract’ type approach.

The percentage that you pay will change when your salary changes. If your salary decreases after you pay for your policy, the monthly payment you will receive will be smaller.

The benefit of this policy being available is that it is much cheaper and are typical well suited toward people that have a stable, consistent salary.

What are the Premium payment options like?

When it comes to your payments for your income protection, you generally have two options:

• Level premiums
• Stepped premiums

Which one you chose just depends on both what you would prefer to pay when renewing your policy, and what you are happy paying later in the future.

Level premiums come with a higher cost at the beginning of your policy, and the changes to the cost onward from that tend to increase slowly over time due to it not being based on your age.

The opposite comes with the Stepped premiums. These are solely based on your age, meaning your costs will increase each year due to the higher chances that you will need to claim as you get older. These are recalculated every time the policy renewal comes around.

How do I buy Income Protection Insurance as an expat?

You can buy this type of insurance from any of the following:

• Direct from Insurance companies
• Independent Insurance Broker
• A Financial Advisor

It is always recommended to seek professional advice before making any important financial commitments, especially those that are long-term.

It is important to remember that an independent financial advisor can offer you tailored advice based on your needs and personal circumstances.

This means that they can also assist and advise you in whether you should consider investing in Income Protection Insurance, to ensure you are making smart, informed decisions.

Income Protection for expats through The Expatriate Group and Experts for Expats

At Experts for Expats, we partner with The Expatriate Group who who specialise in providing insurance for people who live abroad. As with every insurer, you should check what is included in the cover before proceeding with any agreement and always compare like for like.

The income protection plan offered by the Expatriate Group is a Personal Accident and Illness Plan; which is similar to one that provides weekly benefits but with a few distinct advantages.

The payments on weekly income protection plan are made based on a salary multiplication factor and the maximum cover allowed is normally between 70/75% of gross annual salary. The Expatriate Group's Personal Accident and Illness plan has a x10 annual salary factor as a maximum (max cover $150,000 or currently equivalent).  The advantage here is that there is no ‘subjective’ factor that comes into play to determine continuation of the payment.  This means that the weekly income replacement you would be required to meet the criteria for continued payment to be made, whereas the lump sum payment is made based on these assessments once and then the payment made.  This amount can then be invested to provide an income.

The Expatriate Group also offer an optional benefit ‘Temporary Total Disability’ and if selected this would offer weekly payments, following a deferment period.

If you would like to create a no obligation quote, you can do so through this link: https://quote.expatriatehealthcare.com/income-protection/ExpertsforExpats