Life insurance in the UK: Complete guide for expats

Life insurance is intended to offer financial security for people left behind when a policy holder dies. You may want a life insurance policy to make sure your partner or children get some money to help them after your death, or you might want senior life insurance which will cover essentials like funeral costs to avoid adding pressure to your family when you die.

As an expat your life insurance needs may look a little different to UK citizens and permanent residents. Your decisions may be dictated by how long you plan to be in the UK, and the situation your dependents are in during your stay. This guide walks through common UK life insurance options so you can decide if one is right for you.

This guide is for information only and does not constitute advice. Different types of insurance are suitable for different individual needs. Get professional advice and support to choose the right policy for your unique situation.

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What is life insurance?

The Association of British Insurers describes life insurance as insurance which provides a cash lump sum upon the death of a policy holder. 

Depending on the policy selected, this may allow you to guarantee that your loved ones will have the financial means to cover funeral costs, continue paying a mortgage, or to relocate to your home country if you’re in the UK as an expat. 

Different types of life insurance are available in the UK to meet the varied needs of customers – this guide walks through some which may be suited to the needs of expats to start your research on which policy is right for you.

Types of life insurance available in the UK

The types of insurance which are considered life insurance in the UK include:

• Term Life Insurance
• Whole Life Insurance
• Over 50 Life Insurance
• Group Life Cover
• Critical Illness Cover

Within each category there are different policy types, which can suit the needs of different individuals including expat in the UK. This guide looks at the most commonly selected life insurance types, and we’ll also touch on Group Life Cover which is usually employer provided as a bonus.

Here’s a quick summary of the key policy types we look at in this guide, with more detail coming up right after.

This guide is for information only and does not constitute advice. Different types of insurance are suitable for different individual needs. Get professional advice and support to choose the right policy for your unique situation.

Term life insurance

In the UK, Term Insurance is one of the most commonly selected types of life insurance. This insurance pays out a lump sum upon the death of the policy holder, to allow individuals who want to ensure the financial well being of their family in the event of their death. As this type of policy is also useful for families which may have dependent children, there are also some policies offering regular payments in lieu of a lump sum payout, with conditions applied.

There are different types of Term Insurance in the UK, which can include:

Level term insurance – you pay a fixed premium for a set period of time, and may need to renew the policy if it expires

Decreasing term insurance – you pay premiums which may reduce over time, and can receive a reducing pay out over time in return – often used to ensure a mortgage can be paid off if one partner in a relationship were to die

Family income benefit – family policy which replaces a lump sum with regular payments in the event of the policy holder’s death – this can be one of the most expensive options

Increasing term insurance – costs and cover levels increase over time, offered to keep up with inflation and ensure cover purchasing power remains level, for example

Term insurance isn’t the right choice for everyone but the fact you can select the term you want to be covered for may be appealing to expats on short or medium term assignments in the UK.

Whole life insurance

Whole of Life Cover, which may also be known as life assurance, is intended to be used on an ongoing basis, with the policy holder paying premiums right up until their death. This is unlike a term insurance policy which runs for a fixed time in most cases.

Whole Life insurance guarantees a pay out to the beneficiaries of a policy, upon the death of the policy holder, whenever the individual should die. There is also often an investment element in a whole of life policy which allows the policy holder to withdraw or cash in some portion of the amount they’ve paid. As long as they maintain the premium, the lump sum death benefit should still be paid upon a valid claim.

This type of insurance may be more suitable to expats moving to the UK for good, as policies may be less designed to cope with the long term needs of individuals who live in different countries.

Over 50s life insurance

As the name suggests, Over 50 Plans are intended for individuals over the age of 50. They’re usually meant for people who want to leave a fixed sum upon death, either to cover their funeral costs or as an inheritance. 

As these policies are designed for older people they may have higher premiums, but usually do not require medical checks. Costs and coverage levels depend on the specific policy you choose.

These policies may be suited to expats and non-UK citizens retiring in the UK for example.

Life insurance requirements for expats in the UK

Whether or not you can get life insurance coverage in the UK will depend on many factors, including your residency situation, age, health and the type of policy you need. As a general rule, UK providers offer life insurance for UK residents only, although some specialist companies may offer more global policies for international use.

To give an example, Barclays – a major UK bank which offers life insurance – offers policies for UK residents aged 18 – 74. These are the only blanket eligibility rules used by Barclays – but other requirements may apply for specific policies. For example you may find there are health requirements which could need you to take medical examinations.

How much life insurance do you need?

The amount of life insurance you need depends on many factors. You’ll need to consider what value lump sum you would want to pay out, based on the situation your loved ones would be in if you died. 

This is enormously varied. For example, you may have a local or international mortgage which would need to be paid, perhaps your partner has stopped working to support your international move, and would need funds for day to day life, or maybe you’d like to leave extra to cover the costs of repatriation if your family would choose to move home if you were to die. 

There are calculation tools available from life insurance providers, such as the Barclays Coverage Calculator which are intended to help you decide on the insurance you need. However, bear in mind that these tools are primarily intended for UK citizens and long term residents and may not cover all the factors which are important to expats in the UK.

Life insurance costs and premiums in the UK

Insurers calculate the premiums payable on a life insurance policy on an individual basis. Factors affecting premium costs include:

• Your age
• Your health
• How long you want the cover for
• The level of cover you need
• Whether you smoke

You will need to talk to an insurance broker, or use online calculator tools to generate a few quotes based on your unique information, to get a feel for the premium costs and options you’re likely to have.

Buying life insurance in the UK as an expat

Buying life insurance in the UK as an expat should not be complicated as long as you’re a legal resident and can provide all the documents and information the specific insurer requires. Here’s an outline of the usual process:

Step 1: Decide on the cover and policy type you require

Consider the cover level you need, and the policy type – term insurance or whole of life insurance, for example. Get professional advice if you’re not sure which policy is right for you.

Step 2: Shop around to generate quotes from different providers

Most insurers have online tools to get an indicative quote for premiums and costs. Or you can use a broker to get quotes for you, to decide the right policy for your family.

Step 3: Apply online, uploading any required documents

You can usually submit your application online, and will be asked to upload documents proving your identity, address and legal residence in the UK. Depending on policy type you may also need to provide health, employment and other information and paperwork.

Step 4: Undergo medical checkups if needed

Some policies will accept your medical information without checkups – others require you to attend an in person appointment to verify your health.

Step 5: Receive your policy document and start paying premiums 

Once your policy is prepared you’ll be sent all the relevant paperwork to review and you can start to pay your premiums.

Employer-provided life insurance

Employer-provided life insurance, which is also called Group Life Cover, is a common benefit for UK employees at a management level and above. This usually provides for a pay out of a fixed lump sum, calculated in reference to your salary, if you were to die in service. Your beneficiaries may get a pay out of 3x your salary, for example, subject to specified terms and conditions. 

Ask your HR department if this is provided in your workplace.

International life insurance vs local coverage

Standard UK life insurance policies from major providers usually require you to be a UK resident. If you don’t have life insurance when you move to the UK, taking out a local policy could be an option to cover you while you’re in the country.

If you already have a life insurance policy in your home country you will need to talk to your insurer to understand what happens when you move overseas.

Customers who are looking for a policy which can remain open wherever in the world you live, will likely need to talk to a specialist broker and look for offshore insurers which have more flexible residency policies compared to major UK insurers.

If you need to pay for life insurance premiums in your home country or in foreign currencies, consider using Wise to make your overseas transfers. Wise offers one off and recurring payments and uses the mid-market exchange rate with low fees, and offers transfers to 140+ countries globally. This can help ensure your recurring bills are paid seamlessly and without excess costs.

Life insurance beneficiaries and international considerations

If you’re an expat in the UK you may want to name individuals in a different country to be your beneficiaries in the case you were to die and your policy pays out. This may or may not be possible, depending on the policy and the country involved.

You may need to take professional advice to check the policy you have selected is suitable for your specific situation. Some important questions to think about include:

• Is naming beneficiaries in different countries possible?
• What are the tax implications for international beneficiaries based on their residency?
• What is the payout procedure if your policy pays out to someone overseas?
• How does currency conversion work if there’s a cross border payment?

If you’ve received a payment which you need to move overseas, choosing a provider like Wise can help mitigate some of the concerns about managing money across currencies. You can send payments with the mid-market rate, or receive and hold payouts in 8+ currencies without needing to convert unnecessarily, in a Wise account.

Life insurance when moving countries

Life insurance providers set their own rules about policy eligibility, which may include requiring UK residence. If you’re moving from the UK to another country and have an active life insurance policy here, you’ll need to check with your insurer if you can maintain your policy from another country. If not, you may need to close it and open a new one once you relocate.

Tax implications of life insurance in the UK

As tax matters can be complex – and get even more complicated when dealing with different countries – you will need to get professional advice about the potential tax implications of life insurance in the UK in your situation.

Depending on the policy you have and its intent, as well as your home country’s rules on taxation on insurance, you may find there are steps you can take to limit your tax exposure, such as placing your policy in trust, for example.

Life insurance and estate planning

The UK has inheritance tax which is settled from the estate of a deceased person rather than being paid out by beneficiaries of a will in most cases. If you’re planning how your finances might work in the event of your death in the UK it is important to get professional advice to structure your assets most appropriately and remain within the law. 

There’s also plenty of information online which may help, such as UK government information about tax after a death, including details of taxable elements of death in service benefits.

Planning and management of international assets including insurance lump sums could involve large international transactions. If you need to move a large payment overseas, Wise could help, with high transfer limits (usually around 1m GBP or equivalent), transfer fees which get lower when you send over 20,000 GBP, the mid-market exchange rate and a dedicated customer support team for large transfers.

Common life insurance mistakes to avoid for expats

Before you decide on the policy for you, consider these common life insurance mistakes to avoid for expats:

• Choosing the wrong policy type for expat lifestyle – not all policies are right for people living overseas. Get professional advice when you choose
• Underinsuring – bear in mind that your dependents may have different needs while you’re living internationally, and you may want to raise your lump sum accordingly, to pay for relocation for example
• Underestimating currency costs – fluctuations in currency rates could mean you have not selected a policy which matches your needs 
• Failing to update beneficiaries after moves – make sure your insurer has your most up to date information at all times
• Letting coverage lapse during relocations – check if your policy is valid after a planned move, and make sure you continue with premiums if it is

Life insurance claims process

If a loved one dies and you need to submit a life insurance claim, you’ll first need to get in touch with the insurer to report their death. To make the process easier you may need to find the policy number, and you can check the additional information the insurer needs when you speak to their service team. 

Usually you will be asked to submit a death certificate upon receipt and other relevant paperwork like your own ID documents. Once a claim has been approved it will be paid out according to the policy type.

Getting professional advice in the UK

A good place to start for professional advice on insurance is the British Insurance Brokers’ Association (BIBA) website, which lists financial advisers and insurance brokers. 
You can also look for online or word of mouth recommendations of individual brokers, or try a digital comparison site like unbiased.co.uk.

Conclusion

Life insurance can offer peace of mind that your loved ones will be protected if you were to die. In the UK you usually have to be a local resident to take out a life insurance policy, which means that choosing the right policy as an expat might take a little research. This guide walks through some basics of the types of policy available – and you can also get professional advice through a broker to help you choose the right service for your needs.

If you’ve received a lump sum payment which you need to repatriate or convert to a different currency, remember you can make high value payments from the UK, to 140+ countries, with Wise. Wise uses the mid-market rate with no markup to worry about, and  fee discounts on high value payments over 20,000 GBP. This helps with keeping costs low and making the process to transfer overseas simple, convenient and cheap.