Foreign people living in Japan face many challenges. Whether cultural differences or language barriers, these issues can be frustrating and make simple tasks arduous. One challenge foreign people living in Japan face is getting life insurance. Navigating the Japanese insurance industry is hard, especially if you do not speak Japanese or understand foreign insurance. Many foreign people living in Japan elect to forgo life insurance altogether. Unfortunately, neglecting life insurance can severely jeopardize the security of loved ones.
The Importance of Life Insurance
Japan is known well for its safety. In fact, according to the World Population Review, Japan is the ninth safest country in the world. While Japan ranks as the ninth safest country globally, Tokyo is the number one safest city in the world. Japan’s high safety rankings are primarily due to a meager crime rate. The World Population Review ranks countries using data about violence, political instability, terrorism, and several other factors.
Even though Japan is a very safe place to be, it would be wrong to assume that you cannot die unexpectedly. People die in Japan every day. Whether from disease, violence, or accidents, death is a part of life, even in Japan. In 2020, the Japanese government recorded a total of 929 homicides.
In 2020, 2,839 people died in traffic accidents on Japanese roadways. In total, there were 309,178 recorded traffic accidents in Japan in 2020. Regardless of where you are in the world, death is a part of life. Japan is no different.
Life Insurance Gives Your Family a Financial Safety
Life insurance is essential because of how unpredictable death is. Most people know someone who has died unexpectedly and have possibly seen how it has affected those close to the deceased.
Fortunately, life insurance can mitigate some of the issues an unexpected death can bring. Life insurance is a safety net, and while it doesn’t take away the pain of death, it can reduce hardship and make grieving easier.
If you are the primary source of income for your family, your death could leave your loved ones financially ruined. In this case, the safety net life insurance provides acts as a substitute for your income.
Death is expensive. Whether funeral costs, outstanding debts, or living expenses, life insurance takes care of your family. When your family is grieving your death, the last thing you would want is for them to have to worry about their finances too.
Life insurance is conceptually straightforward. The best way to view life insurance is to substitute for your income and something to make your death a little easier for your family.
Life Insurance and International Travel
Insurance companies are businesses. And like any good business, they want to maximize profits. In the spirit of profit maximization, insurance companies also want to avoid paying you for any possible reason.
Insurance companies can void life insurance policies for many different reasons. In general, failure to disclose information is the biggest reason why insurance companies could void a life insurance policy. The insurance companies also look for ways you violated clauses in your contract. Some policies will say outright that if you die overseas, you do not get a death benefit. Other policies may say you are required to inform the insurance provider before you move abroad.
Failing to disclose that you have moved abroad is a common reason for your insurance company to void your life insurance. In this case, insurance companies want you to compensate them for the increased risk associated with international travel.
Suppose you have moved to Japan from the United States. It would be logical to assume that your risks of dying have decreased. Statistically, Japan is a much safer country than the United States. Unfortunately, life insurance does not work like this.
Standard life insurance policies will state in which country or region you have cover. In most cases, if you die in a country where you did not live when you purchased your policy, the insurance company will void your policy. You can find this information by checking the fine print of your current life insurance policy.
The complexities of international travel may be overwhelming and even cause you to question if life insurance is worth it. This thought process is understandable. You may ask yourself, “why should I get life insurance if I don’t even know if they will pay me?” However, the fact is, life insurance is essential. For regular people, living without life cover is simply a bad idea.
Fortunately, International Life Insurance exists and makes life insurance a lot simpler. International life insurance covers your family, regardless of where you are. For international families, international life insurance is a great option. By removing the headache of dealing with foreign life insurance companies and providing reassurance that you are covered wherever you are, international life insurance makes insuring your family’s security much more straightforward.
International Life Insurance
International life insurance is simply a life insurance policy covering you in multiple different countries or regions. If you move to another country, your life insurance policy comes with you.
Other than providing you with international cover, international life insurance is the same as regular life insurance. If you die, regardless of which country you are in, your family will receive a death benefit.
It is important to keep in mind that life insurance policies can vary significantly. There is the potential for certain countries not to be eligible for coverage. Usually, these countries will be where there is constant and active conflict.
Usually, premiums for international life insurance can be slightly higher. For most international families, this extra cost is worth it. International life insurance reduces the hassle of dealing with foreign insurance companies, saving countless hours and headaches.
The conditions for international travel can varying from company to company. An experienced financial advisor will be able to help you find the right policy for your needs and explain the ins and outs of your specific international life insurance contract.
International Life Insurance Can be Paid in Multiple Currencies
An unexpected death can cause immense problems and can cause lots of stress for loved ones while they finalize affairs. If your family’s financial security is contingent on life insurance benefits, having them paid in the wrong currency can create more problems.
One of the key benefits of international life insurance is that your family can select the currency they receive for the death benefit. Suppose you died in Japan, but your family lives in the United Kingdom. In this case, if you have non-international Japanese life insurance, your family will receive the death benefit in JPY.
Fortunately, international life insurance gives your family the ability to receive death benefits in another currency, such as GBP. In the case of international life insurance, it does not matter where you die. Your insurance company will pay your family in the currency that best suits their needs.
Many foreign people living in Japan purchase international life insurance and decide to receive death benefits in EUR, GBP, or USD.
How to Set Up International Life Insurance
Find an International Life Insurance Company
The first and most obvious step is to find an insurance company that offers international life insurance. This first step might seem obvious, but it can be a challenge.
Some Japanese insurance companies offer international life insurance. Unfortunately, communicating with a Japanese insurance company can be difficult. Communication failures, especially as they pertain to life insurance, can cause many problems.
Finding a Japanese insurance company with English-speaking agents is not incredibly difficult, but having your policy translated into English can be dangerous. Without truly understanding your life insurance policy, you are an easy target for insurance companies to take advantage of you.
Often foreign people in Japan rely on translations of contracts. Relying on a translation can be very dangerous, as the insurance company will always honor the original Japanese contract. Translation errors are common, so you should always be careful when deciding to translate contracts.
Because of the many challenges that foreign people living in Japan face, it may be beneficial to speak to a financial advisor about finding international life insurance.
Find Out How Much Cover You Need
Getting the correct amount of life insurance cover is crucial for the security of your family. Unfortunately, finding the optimal amount of cover for your needs can be challenging. You should consider all the following factors when deciding how much life insurance cover you need:
Length of Liability
Figuring out your length of liability is the term that insurance companies like to use when deciding on a policy. Length of liability means the length of time in which you are responsible for things. There are many different liabilities to consider when deciding on life insurance cover.
Dependents are usually the most significant and most crucial liability. Dependents are children, and you want life insurance cover that would see them into adulthood and past university. The number of children you have and their age both affect how much cover you need.
The more children you have, and the younger your children are, the more life insurance cover you need. However, it is also essential to consider your current level of financial security when deciding on a policy.
If you are starting towards financial security, you may need a more significant level of cover. On the other hand, if you already have a high level of financial security, a smaller life insurance benefit may suit your needs.
Life insurance benefits can pay for your children’s higher education. University can be expensive, and it can take many years to save enough money to pay for your child’s education. If death cuts your working career short, life insurance can provide your family with the funds to pay for education.
Most people have at least some debts, whether a home mortgage, business debt, or a car loan. Debt is a significant liability to factor into your life insurance policy. In general, it would be ideal to have a life insurance policy that allows your family to pay off your debt and have money left over to support them going forward.
In the case of life insurance, one of the most significant debts is the home mortgage. Most homeowners have a mortgage, and nobody wants to lose their home. For many people, giving their family the ability to pay off the mortgage and not worry about their living situation if they die is a desirable aspect of life insurance.
Giving your family the ability the pay off the mortgage is critical if you are the primary source of income. If you are the primary breadwinner, your family will likely not have the cash flow to pay the mortgage. Lacking cash flow could force your family to sell the home or even cause your family to become bankrupt.
If you died, your family would be grieving, and the last thing they should have to worry about is having a roof over their heads. Fortunately, a life insurance policy that gives them the ability to pay off their mortgage can take away a significant degree of that uncertainty.
Moreover, many people pick a term length that aligns with their home mortgage when deciding on a term length. For example, suppose your mortgage has 20 years remaining. In this case, a life insurance policy that will cover you for the next 20 years may be a good option for you.
However, there is much more to factor in when determining your length of liability. Financial advisors with experience in insurance can help you determine your length of liability accurately. Having an accurate idea of your length of liability can ensure that your family gets the protection they need.
Once you have determined the amount of life insurance cover you need, you should consider the differences between term life insurance and whole life/permanent life insurance.
Term Life Insurance
Term life insurance is the most common type of life insurance. With term life insurance, when you purchase your policy, you decide on a term you would like to have life cover. These terms can be varying periods. 20 and 30-year terms are some examples of life insurance terms.
If you die during your term of cover, you receive death benefits. Of course, this is assuming your death did not breach your life insurance contract. If you breach your contract, your insurance company will void your policy, and your family won’t receive the death benefit. Even if you die during your term.
Term life insurance is usually the most cost-effective option, as the policy expires when you grow old. The life expectancy in Japan is approximately 84 years, meaning you are not a huge liability for the insurance company if your policy expires when you are 70. Term life insurance policies allow the insurance companies to charge you a lower premium than they would if you opted for whole life/permanent life insurance.
Usually, people will decide on a term length that aligns with their length of liability. For many people, a term that will cover them until their dependents are no longer dependents is popular. Term lengths that expire once you have paid off all major debts, such as the home mortgage, are also popular.
However, some people are willing to pay a premium for a type of life insurance cover that does not expire.
Whole Life/Permanent Insurance
Suppose you wish to have cover for the rest of your life and guarantee your family a death benefit. In that case, whole life/permanent life insurance may be a good option for you.
It does not matter when you die with a whole life/permanent life insurance policy, and your policy never expires. Even if you live to be 100, the insurance company will pay your death benefit. This type of life insurance policy comes at the cost of a higher premium than you would pay with a term life insurance policy.
Since everyone will die at some point, it is important to factor in the logic of insurance companies here. It would not make sense for them to sell whole life/permanent life insurance policies if they weren’t making money on them. You should consider whether you could build more wealth by investing the premium than your family would get from the death benefit.
Questions like these are why it is usually a good idea to consult a financial professional before beginning your search for life insurance. Financial professionals experienced in life insurance will help you find the right international life insurance policy for your needs and ensure the long-term security of your family.
[ Sources ]
– Dimkoff, Gregg and Boersma, Bill. “Comparing Term Life Insurance Policies.” Journal of Financial Service Professionals. Vol. 74, No. 6. 2020.
– “Japan Saw Record-Low Expressway Deaths in 2020 as Virus Halted Travel.” The Japan Times. 2021.
– “Safest Countries in the World 2021.” World Population Review. 2021.
– “Term Life Insurance: 10, 20 & 30 Year Renewable & Convertible Term Life Insurance.” American Fidelity. 2018