This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, it is subject to change and we are not responsible for any errors or omissions.
What would happen to your loved ones if the worst happened? This is not a fun question to ask ourselves, but it must be asked – especially if we have dependents, such as young children. British expats do have a range of financial protection options. In this guide, our financial advisers focus on Seguro de Vido – i.e. life insurance – for UK nationals living in Spain, offering insights to help you navigate your choices. We hope these insights are useful. If you want to discuss your financial plan with a member of our team, please get in touch to arrange a no-obligation financial consultation, at our expense:
+34 966 460 407
info@scottsdale.eu
What is Seguro de Vido?
Seguro de Vido is the Spanish term for life insurance. Similar to UK-based policies, Seguro de Vido pays out a lump sum to your loved ones if you (the policy holder) die within its terms. The money can then be used for different purposes such as:
- Paying off outstanding mortgage debt
- Providing a temporary source of income to support your loved ones
- Settling various bills such as medical, travel and funeral expenses.
This kind of financial protection could be vital for British expat families in Spain. If you are the primary income provider, for instance, could your loved ones afford to sustain their lifestyle if you die unexpectedly (at least in the short-term until a possible repatriation to the UK)?
Types of life insurance
Similar to policies in the UK, Seguro de Vido comes in two primary forms – “whole-of-life” and “term assurance”. The latter type is usually cheaper, covering the British expat for a defined period (e.g. 20 years). The duration could be linked to your remaining mortgage period, or an alternate timeframe, depending on your needs.
Whole-of-life cover, by contrast, does not have a cut-off date. The protection continues indefinitely. This secures an eventual payout to your chosen beneficiaries, but the added cover tends to result in monthly premiums which are more costly. There can be an upside, however. These policies can accumulate cash value over time, providing access to funds which can be used for various purposes – e.g. investing in shares.
Deciding on cover
Naturally, if you have no dependents (e.g. you are a single person living abroad) then this lowers the urgency for Seguro de Vido. If you have sufficient assets to financially support your loved ones, such as 12+ months’ worth of living costs in easy-access savings, then this can lessen the need for Seguro de Vido.
For employed British expats in Spain, sometimes employment contracts offer “death in service” benefits if you die whilst working for the organisation. The payout varies from company to company, but a typical figure is 4x your annual salary. It is worth checking for these kinds of benefits before turning your attention to the wider life insurance market.
If you think you might need life insurance as a British expat in Spain, a good ballpark payout figure for workers is 10 times your annual take-home pay. For those approaching retirement, another method is to calculate the years until your retirement date (e.g. 10 years). Then, multiply your annual earnings by that figure.
A final method is to work out your minimum monthly/yearly expenses, the value of your outstanding debts (including your mortgage) and then multiply the total by the number of years until your youngest child reaches age 18. These and other methods can all help you estimate how much you might require from a Seguro de Vido payout. The most reliable method, of course, is to seek professional financial advice.
Finding the right policy
The two key variables to consider when approaching Seguro de Vido are premiums and cover requirements. Naturally, a British expat should aim to minimum the former and maximise the latter. In general, the higher your perceived risk to potential insurers, the higher the monthly costs will likely be. Living a healthy lifestyle, such as stopping smoking and exercising regularly, can help to reduce premiums from different quotes.
Take time to think about what you might need from your policy. For instance, do you need “guaranteed insurability” (taking away the need for further medical exams)? Do you need cover against accidental death or accelerated death benefit (letting you access some of your payout if you are diagnosed with a terminal illness)? It can be difficult for an individual British expat to judge what they need, exactly, and how much they should pay for it. Working with a specialist expat financial adviser can help you navigate the process with greater confidence and insight, maximising your ability to find a comprehensive policy at fair value which you are happy with.
Invitation
If you are interested in discussing your own financial plan or inheritance tax strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
+34 966 460 407
info@scottsdale.eu