True Cost Of Protection: Understanding Insurance For American Expats

A survey by KFF, a nonprofit health organization, highlighted how 58% of Americans have problems using their health insurance due to denied claims, provider network problems, and pre-authorization problems.

Given the high cost of healthcare in the United States, millions of Americans have chosen to live abroad to seek better protection and quality of life. The reality, however, is not as straightforward as insurance for Americans living abroad can be complicated and costly.

In this article, we explain why you should opt for worldwide coverage for your health insurance and how to use the three Ls to determine the cost of your life insurance, giving you a better understanding of the true cost of protection for American expats.

International vs local health insurance plans 

Robust international health insurance is essential for expats as it protects them from unforeseen medical expenses, whether it is an injury from an accident or facing health complications, such as a heart attack, during travels or while living abroad.

You have the option to choose a local coverage in the country you are residing in; however, for expats, an international health insurance plan should be the preferred choice. 

Here are some key factors, we at Melbourne Capital Group will consider when sourcing international policies for our clients:

• Geographical Coverage: A local insurance plan will only cover you in your country of residence. An international plan provides coverage globally, except in the US due to the high healthcare costs. If you travel back only once or twice a year, it would be more cost-effective to use travel insurance to protect you when you visit. 
• Pre-existing Conditions: With an international plan, any pre-existing conditions (cancer, diabetes, etc.) can still be covered even if you move to a different country. With a local plan, you might not be able to get the same coverage, or pay higher premiums, when you move to another country.
• Language and Support: One aspect that local insurance plans might not consider is the need for multi-lingual support. International plans often prioritize hospitals and medical institutions that offer multi-lingual support and understand the diverse needs of expats.
• The ability to customize: International insurance plans are typically more customizable than local coverage. You can tailor the plan to include specific countries or regions to ensure that you are covered in places that are relevant to you. 

Look at your three Ls to calculate your life insurance

Term life insurance is typically the best option for American expats. It is the simplest and least expensive option while providing international coverage.

The cost of your term life insurance will depend on the three Ls; Liabilities, Lifestyle, and Legacy.

• Liabilities: outstanding debts (mortgage, car loan, personal loan).
• Lifestyle: securing continued quality of life for family (income replacement).
• Legacy: what you would like to leave behind (children’s university fees).

By determining the cost of each component, you can have a clearer picture of how much you would need for your life insurance. 

How to calculate the cost of your Term Life Insurance:

Martin, 45, is an American expat currently living in Malaysia. He is married and has two young children aged 8 and 5. He is currently earning $100K per year and wants to retire at the age of 65. 

We can calculate his total cost as below:

Liabilities = $220,000 ($200K mortgage + $20K car loan)

Lifestyle = $1,000,000 (cost of running the household $50K per year X 20 years)

Legacy = $320,000 (university fees of $40K per year X 4 years X 2 children)

Total Insurance Required = $1,540,000

For Martin to receive a lump sum payout of $1,540,000, he would need to pay $5,263 per year, until the age of 65. 

When to start and how long do you need insurance for?

It is recommended to secure insurance as early as possible. The younger you are when you apply for insurance, the lower the premiums will be and any additional policies that you need can always be added in the future.

It’s best to have health insurance for your entire life. This ensures that any costs relating to healthcare expenses, such as doctor visits, hospitalizations, surgeries, and prescription drugs, are covered.

Life insurance would ideally be required only until you retire. By the time you reach retirement age, you should already have your retirement fund to rely on for financial protection and an estate plan to protect your financial legacy.

Answers to an American Expat’s most pressing Insurance questions abroad.

Living abroad as an American poses a unique set of requirements when it comes to insurance coverage. Here are the two most frequently asked questions faced by our Private Wealth Manager regarding insurance policies:

1. What happens to your policy when moving to a new country?
   We ensure that your policy is set up internationally and will stay in place regardless of future relocation.
2. Can you have a life insurance plan with an investment element?
   Americans need to be careful with insurance plans containing an investment element because international insurance plans tend to include investments that are classified as PFICs, and thus subject to additional U.S. tax and reporting obligations.

Finding the right life and health insurance for you 

At Melbourne Capital Group, we understand the need to provide the best protection for you and your family. 

We also recognize that everyone is different and requires a personalized approach to their insurance coverage. By analyzing each individual’s situation, we ensure that we recommend the best, and most relevant type of protection available.

With the help of our dedicated U.S. Private Wealth Managers, we can help you find the best insurance plan that suits your needs.

‍Learn more about our process of sourcing coverage for life insurance and health insurance. Or talk to our U.S. Private Wealth Manager, Michael Garcia at michaelgarcia@melbournecapitalgroup.com, if you are unsure about which insurance plan is right for you or are considering changing your current plan.