The power to make a living is priceless

The power to make a living is priceless

The power to make a living is priceless. So why are you not protecting it? Perhaps back home these things are taken for granted. As an expat, you are effectively on your own when you live abroad.

Last week, we discussed the need for life insurance. I hope it enabled you to make a meaningful evaluation about whether you need cover.

Now let's consider what would happen if an even greater financial disaster than dying hit you. Suppose you were disabled or struck down by a serious accident or a dreadful disease? Unable to work and reliant on constant, expensive medical care, you would find your entire financial world turned upside down. Securing insurance to cover you for lost earnings is something you ought to seriously think about when you evaluate whether you need personal or family protection insurance.

Several years ago, I knew an expat in Bangkok who was admitted to hospital with chest pains. It was quickly discovered that he had a heart problem and triple bypass heart surgery was required. His global income protection insurance paid him 75% of his salary during his recovery. However, after six months he was advised that he could work again but only in a job with less pressure. He thus managed to get a different job but had to accept a lower salary.

While the executive was disabled, his protection policy had been kept up to date by his insurance company. Had this not happened it would have been highly unlikely that he would have been able to buy further salary protection with his heart condition.

Several months later he suffered a stroke and was subsequently paralysed on one side. He was then declared unfit to work at all and the prognosis was that he would never return to any job. His insurance is now paying him 75% of his new salary until he reaches 65 or dies. He will then be receiving a pension and thus the transition should be  smooth.

His lifestyle has changed dramatically and he now relies on medical care and continuous support from his family. This is expensive and if there had been no insurance, life would have changed beyond recognition for this expat and his family.

I hear so many expats say that this will never happen to them and I know the chances are slim. However, I know this particular expat and when it comes as close as this to me, I realise that I can never be so complacent as to assume I will avoid any situation like this.

In developed countries, only about a third of the population have any savings and those who do only have enough to survive for less than a month without income. In the last few years the trend has changed and more people are saving but still very few have the reserves to cover any kind of catastrophe, let alone unemployment.

Expats tend to be more forward-thinking than this and the majority will be making provision for their retirement because as expats it is up to them to think of such things.

I recently asked several expats why they have no life insurance, disability or salary continuance insurance. The responses were interesting:

"My parents would support my family and care for my children if I died."

This is not only impractical but very complacent and self-centred. Would you expect your parents to support you during times of unemployment?

"I am covered by my employer's scheme."

Have you checked this insurance and made yourself familiar with the terms and conditions? Are you covered while you are not actually at work? Does this include travel to and from work? Many employer schemes do not cover you until you have actually arrived at your workplace. Cover also ceases after you leave the workplace. Thus travelling to and from work on a daily basis does not provide cover for you. Weekends and holidays will also be excluded.

"My occupation would not allow me to have insurance."

Have you assumed this or did you apply? Many use excuses such as this so they do not feel uncomfortable. You would also be surprised at what risks are accepted these days. Every case can be evaluated and considered by an underwriter.

"I was not aware that I could have insurance as an expat."

Is this a genuine mistake or just another excuse?

"I have a scheme that has been in force since before I left my home country."

Schemes you start at home are usually invalid if you go to live in another country. Did you check with the insurers since you moved? As an expat you can secure a dedicated global cover plan for yourself so that no matter where you live or even travel you are covered.

Are you aware that the majority of expats insure the following:

personal belongings on a worldwide basis;

household contents against almost any type of disaster;

cars against damage requiring expensive repair;

property against risks for repair or total rebuilding after a catastrophe;

pets, to cover large veterinary bills.

All these are valuable assets that are worth protecting. You might insure:

your personal belongings for US$100,000 (3.08 million baht);

household contents for $200,000;

your car for $40,000;

your house for $500,000;

your pet for $25,000.

The same expats are negligent about their most valuable asset of all: their own earning power. Do you realise this is the most valuable asset you have? Most people will earn in excess of US$2 million in their lifetimes and yet they fail to protect this by insuring themselves. If you owned a one-armed bandit machine that would pay out $1,000 every Friday, would you insure it against breakdown and loss? So why would you not insure you own earning power in the same vein?

How does this compare with the protection you afford your pet in case of high vet bills?

Life, disability and loss of earnings insurances are probably more cost effective than many expats would believe. Will you be one of the sensible readers and make arrangements while you are actually able? The alternative could be a living nightmare.

Contact your professional adviser.

He or she will discuss your practical needs and develop recommendations for the cover you both agree is required.

He or she will also arrange competitive quotes for you and administrate putting cover in place.

Andrew Wood has been an expat in Asia for 33 years and is executive director of PFS International. His articles, which cover the complete A-Z of financial planning, are available through the PFS library to readers on request. Questions to the author can be directed to PFS International on 02-653-1971 or emailed to enquiriesthailand@fsplatinum.com.

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