The Ultimate Guide to Buying Life Insurance for Expats (Say NO to Whole Life)

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Part I: whole life insurance plans have always been controversial globally. They exist mainly to make the insurance company and their sales ‘advisor’ lots of money. You must avoid them or consider escaping from them. Then warn others, as there is a slick marketing machine designed to part you from your cash…

Part II (scroll down): term life insurance is much cheaper and will cover the needs of 99% of people. I’ll show you what to consider and how to buy it.

Part I: Avoid Whole Life Insurance like the Plague!

Spotting toxic products

There are many tasty mushrooms growing in the forest (maybe not in the desert!) but if you eat the wrong one you are going to feel extremely bad. Insurance products are the same, except it may take many years of paying premiums before you realise you have been poisoning your finances.

Life insurance is definitely useful, especially if you have young children and don’t have a high net worth yet (ne t worth = what you own – what you owe).

It’s important to understand that there are two types of life insurance:

Term life: simple, cheap, does the job until your children are grown up and you have a decent-sized investment portfolio.

Whole life: complex, expensive, mixes insurance and investing, designed to give huge sales commissions to advisors, which is why they are so desperate to sell it to you.

When Hong Kong banned upfront commissions for the sale of whole life products, their sales volumes went down 76% in one year. So clearly they were being sold for the commission, not because they are useful.

It’s not just me saying this by the way, here’s The Guardian (UK) calling whole life plans ‘expensive and worthless’.

What’s the difference?

Term life is similar to car or health insurance. You pay the same premium (e.g. $100) every month and your beneficiaries get a large payout (called a death benefit) if you die. The policy runs for a fixed period of time, after which you stop paying premiums and are no longer covered. You can stop paying at any time, you just lose the coverage.

Whole life premiums are maybe 3-10x higher and they get ‘invested’. There are many different varieties, depending on what regulators let the insurers get away with, but in theory you are ‘covered for life’. So even if you die at 88, your beneficiaries still receive a death benefit payout. Also if you decide you want the money in your retirement rather than a death benefit, you can take out your savings.

It sounds good, especially the idea that you are investing money for your future rather than just handing over a premium. Not dying after paying 10 years of term life premiums can feel like renting a house for 10 years – money down the drain. You probably did the right thing though and, hey, you’re still alive!

How the wheels fall off the whole life bus

Insurance and investment should not be mixed. The resulting Frankenstein’s monster is complex, unpredictable, hard to get out of and, of course, has endless hidden fees and penalties hidden in a book of terms and conditions.

These products are sold on commission – which is why you got your ‘free’ consultation with the friendly advisor and why they were always phoning you up. Everything you pay in the first 18 months (and yes that’s a lot) is going to go towards that commission, marketing expenses and profit for the insurer. So you are never going to get it back.

The clever trick is in making sure you don’t realise this. They have many years to show you some bs accounts making it look like your money is growing, even if they took a big chunk of it  upfront. Except if you stop paying in and try to take your money out. Then there is a big surrender penalty because… they paid out those commissions ages ago and most of the time they’re not going to give them back to you.


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The surrender value is the actual value of your policy.

The money invested in your whole life policy attracts very high fees and charges, many of which are hidden. So it is not an efficient way to invest. Often your money is put into exotic funds, such as an Asia Pacific small companies fund, which has high management charges of 1-2% and, guess what, pays a trail commission back to your advisor.

The total charges can stack up to as much as 4% or more per year. If that doesn’t sound much, you can expect to make 7% per year in the stock market over the long term, so you are losing 60%(!) of your annual profits. Over the years, that can add up to hundreds of thousands of wasted dollars. This is the biggest problem with whole life and it wipes out all other perceived benefits like ‘tax efficiency’.

If you try to exit, you will get hit with a big penalty. If you half-ass your exit with a ‘max partial surrender’ then any remaining investments will get eaten by fees even faster, so you might as well have exited. If your policy doesn’t pay out unless you both die, then the surviving partner won’t benefit at all if you die. If your policy doesn’t grow sufficiently over time, the life company may hike up your premiums or reduce your death benefit.

As whole life premiums are much higher than term life ones, they can be a real strain if you suddenly can’t afford them anymore. Stop paying early and you’ll quickly end up with a big mess.

What to do instead

It’s just not worth it. Neither is the pain of continuing to deal with companies trying to bamboozle you into staying forever so their profit streams are safe. Often, if you’re below 50 with no health issues, a clean break is best – rip the band aid/plaster off and learn from your mistakes.

What’s the smart alternative? Buy term life insurance for e.g. $100-200 per month – see Part II below – and then invest the $800-1900 extra (which you would have paid into a whole life policy every month) into the stock market yourself.

By the time your policy stops at say 55, you will have grown a large investment portfolio with super-low fees. So if you die unexpectedly, your other half and family will be just fine.

The sad fact is that whole life policies are not ideal for 99% of expats. Insurers and most advisors have a vested interest in denying this till they are blue in the face.

Endless excuses

Typical excuses to entice you in and then keep you in might include:

1) You’ll get nothing back from term life after the end of the policy or if you decide to stop paying. And you won’t be covered in old age. Except you’re going to have a nice big investment portfolio that you grew safe from their clutches.

2) A whole life policy is a tax-efficient investment for when you return to your home country. Hmm usually the high fees far outweigh any tax benefits. No country taxes you at 60% of your annual profit, right? Plus many governments take a pretty dim view of offshore insurance schemes and your finances immediately become EXTREMELY complex to untangle by tax experts (who are not easy to find).

3) You get access to investment funds and other products that you can’t otherwise invest in. Yep, the ones that pay you the most commission and have a track record of blowing up spectacularly. You don’t have to ask too many expats before you find a depressing case study.

4) You can’t just write off an entire industry. Er… the tobacco industry?

5) If you don’t save your money into this policy, you’ll just spend it. Maybe you will. But surely it’s time to put on your adult pants, deal with your spending problem and take control of your finances yourself.

Time to take back control

Realising you have been suckered into a terrible long-term financial product can be painful and confusing. If you are struggling with being trapped in a horrible plan, reach out to me to learn how to escape and start investing by yourself. Use this pain to turn things around and never look back.

Below in Part II, I’ll talk about how to buy term life insurance in the most efficient and effective way.

It makes me sad that smart, young people work hard to get qualified and then start flogging awful products for commission, egged on by Teflon-coated advisory companies pushing them hard with targets. But that’s the world we live in. Stick to simple products that don’t pay out commission and learn how to manage your own finances. You will avoid a whole lot of pain and feel much better for being in control.


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Part II: How to Buy Term Life Insurance & Critical Illness Cover

Ok, we agree to avoid whole life insurance like the plague and look at term life insurance instead. Here’s how to buy properly.

Why do YOU need life insurance?

Dying early (nobody’s favourite topic) will probably blow a hole in the family finances… if you have a family. If you don’t have any dependents, up and down the generations, you don’t need life insurance.

While you are strumming your harp on a fluffy white cloud, those left below may be facing mortgage payments, having to go back to work to cover the bills, getting the kids through school and university etc.

There are the main expenses. Will your existing assets cover them? Bear in mind property can’t be sold very quickly.

Let’s hit pause while you figure out the main expenses facing your family in the next 10-20 years, add up all your assets and subtract all your liabilities.

Are you covered easily? If not, then you need term life insurance.

The standard rule of thumb for life insurance is to get a death benefit (the payout when you die) of 10 times your annual salary. It may just be the life insurance industry made that one up. How many months’ salary is an engagement ring supposed to cost these days? 3? I think the diamond industry might have come up with that one.

How much do you need really?

You need to cover your mortgage. You should cover the kids’ school and university fees. You need to cover the expenses of whoever cannot work. Maybe throw in a bonus as a way of saying sorry for dying. But that’s about it.

The 4% rule comes in handy here. If you have built a portfolio of $100,000, your dependents can take out $4,000 (that’s 4%) for the rest of their life. A death benefit of another $500k would provide another $20k per year for life.

If your other half is able-bodied and working, they’ll probably be ok with you only covering the major expenditures above. Let’s face it, they’ll probably re-marry someone rich and toast you with champagne once a year. Once the kids are through university, they don’t really need support either.

So: major expenditures + covering lifetime expenses for anyone unable to work easily (via the 4% rule) + a little bonus if you’re feeling generous. That’s how much coverage you need.

Term life as pizza: Quattro Stagioni

There are four types of term life insurance. Not many expats know this! Ya welcome. Not all of them are that tasty, I’m afraid.

Level term: you pay a fixed premium monthly for a set number of years until you stop and are no longer covered. E.g. until you are 60 and the kids have jobs and your investment portfolio is big enough to cover them.

You can stop at any time… though if you suddenly need to start again, for example if the patter of tiny feet catches you by surprise, premiums may have gone up a lot.

The older you are and the longer you want coverage, the higher the coverage will be.

Annual renewable term (ART): it’s the cheapest life insurance there is! Hmmm that’s probably why no advisor has told you about it. Your premium goes up with age each year that you choose to renew. The insurer promises to allow you to renew for a certain number of years, even if you get sick, without your new illness sky-rocketing your premiums.

This will be cheaper than level term over a short-to-medium time period but beyond a decade or two the premiums will definitely be higher as you age. It’s definitely great for short time periods, e.g. paying off a mortgage or making sure a gift of money in the UK doesn’t get slammed by inheritance tax in the next 7 years.

Decreasing term: if you just want to cover your mortgage balance for the next few years, you’re going to need less coverage each year as you pay off some of your mortgage. Decreasing term, sometimes insisted on by banks, covers exactly that.

The only problem is banks and insurers make whopper profits on this kind of insurance, so it’s best avoided. ART would probably do the job just as well, for less.

Increasing (index-linked) term: a payout of $500k sounds delicious right now but we all know in 30 years’ time it will only buy a couple of insect burgers. That’s inflation. At least your premiums will probably get cheaper over time relative to everything else getting more expensive.

If you want your death benefit to increase with inflation, then increasing term is for you, but beware it will increase your premiums with inflation too. Given inflation will generally increase the value of properties and stocks over time, I don’t think you need this more expensive form of insurance. Better to grow your investments instead, then they will look after your beneficiaries more effectively.

Just say no

Joint term insurance may seem appealing, where you pay a discount for insuring you both vs two separate policies. But often there is only one payout and then the coverage stops. It’s like the opposite of a two-for-one deal, i.e. not a great deal for you.

The remaining person will struggle to get cheap life coverage, being older, and if you both die then your beneficiaries may still only get one payout. So getting two separate policies is often a better deal overall.

Critical Illness

Critical illness is a useful addition to your term life insurance. It can be confusing and it only covers the most common 30-40 diseases. It can be well worth it though, as a tough non-fatal illness can blow a hole in the family finances – exactly what we want to avoid.

Typically, you need enough CI protection to cover 4 years’ of expenses. After 4 years of a critical illness, you will usually have recovered or have died… then the death benefit of your term life will pay out.

With term life, and especially with critical illness cover, read the small print! It’s not going to be fascinating but you need to understand what you are getting. Also check the claims ratio of your chosen insurer, being the percentage of claims (such as deaths) they pay out on. If it’s below 98% then you might want to look elsewhere.

How on earth to buy

In most expat countries, there are now websites that compare the best insurance policies for you and may even help you navigate the best options for you. That can help you avoid the more toxic advisory companies flogging crappy savings plans, who will beg you to buy whole life insurance instead.

In the UAE, any company with a legal company name along the lines of Insurance Broker LLC shown at the bottom of their website can legitimately sell you insurance. Insurancemarket.ae and policybazaar.ae are decent aggregator sites that will show you what’s available.

Friends Provident International and Zurich are the two main term life providers in the UAE, with FPI allegedly having slightly better features and coverage per AED, but Zurich being a bit less picky if you have some health issues.

Oman Insurance offers cheap Annual Renewable Term insurance. If you can’t say the name of certain other insurers without shouting angrily at the memories of your terrible savings plan, then they may be an alternative.

There are lots of confusing options here but, unlike whole life (ugh), you can cancel at any time with no penalty. That makes it easy to switch around if you need to. Make sure you are getting the coverage you need. Probably worth spending a weekend figuring it out and then getting on with your life.

Any questions or comments? Add them below…

Image credit: MCWILLIAMS

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8 thoughts on “The Ultimate Guide to Buying Life Insurance for Expats (Say NO to Whole Life)”

  1. Hey Steve,

    This was a great read that helped me understand the two better. I attended your Accenture session last evening and that was eyeopening as well.

    I recently purchased a critical illness plan and a low premium as it was an offer from my bank. I was going back and forth between life insurance and critical illness but then made the decision to go with critical illness as it made a little more sense to me.

    The plan allows me to cancel at any time and since I just started I wanted to get your opinion. It would be great to maybe get on a call to have a better understanding.

    1. Hi Noha, I’m glad you enjoyed the Accenture women’s personal finance session, it was really interesting! If you don’t have any dependents then CI would be more useful than life insurance. You can always book a private coaching session here https://deadsimplesaving.as.me

  2. Hi Steve,

    Just coming across this article and want to be sure I understand the recommendations. I have nothing to do with the UAE – never have and likely never will live or work there. Am I allowed to buy term life insurance there? Will it cover me globally? Is there any potential risk in buying from a company like this?

    Additionally, do you have any experience with Clements Worldwide or any of the other US or UK-based brokers targeting expats?


    1. Steve Cronin

      You’d have to check with a specific provider (or broker) whether they can create a policy for you while not resident in UAE. These policies usually have global coverage and are portable if you move country. Clements looks ok from the website (not pushing whole life insurance for example) but it comes down to fees. See if you can find another provider in UAE or elsewhere to compare to. These global policies are always a bit more expensive than e.g. a UK policy for UK residents.

  3. Fantastic and enlightening article as usual Steve, it shed a whole lot of clarity on a field that I dreaded sorting out given it’s complexity.
    As a Moroccan expat in the UAE, I find the international coverage aspect quite obscure. I am uncertain to which country my career will take me next, and I certainly do not wish to stop/start Life insurance plans every-time I move nor do I want to pay higher Premiums every-time. I am interested to know your opinion on whether I should go with a couple of plans (for redundancy as you recommended) from the UAE (not certain that would follow me outside the country), or reach out to global Insurers such as AIG, Aviva, Prudential….etc. to try and get an international policy somehow.

    Hope to hear from you soon as thanks a lot in advance,

    1. Hi Amine, a policy that you get in the UAE should be international and follow you around. You can always check that with the advisor to make sure they are international.

  4. Hi,

    Very interest article. I’m 38 and working in Dubai, just invested in Zurich Futura earlier this year for whole of life cover. The yearly premium is quite high like you mentioned and it spans over 20 years.

    I did do the math and figured for the first couple of years, anywhere between 5-8% is going straight into the pockets of the broker/advisor/insurance provider. But I also fell for the idea that the invested money will “grow” over time.

    Have I made a huge mistake? Feel gutted…

    1. Hi Karthik, you can grow your invested money much faster in an investment portfolio than inside a whole life plan. Feel free to send me a message.

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