Onshore Vs. Offshore Life Insurance: How to Pick The Option That Is Right for You As An Expat

Onshore Vs. Offshore Life Insurance: How to Pick The Option That Is Right for You As An Expat

Onshore Vs. Offshore Life Insurance: How to Pick The Option That Is Right for You As An Expat

If you’re an expat living in the UAE, should you buy a Life Insurance policy here in the UAE or back home? 

There are a few different reasons you might find yourself weighing that decision, and I’d like to outline in a few quick points the pros and cons of either choice. 

First, a home country-based policy can often be the more attractive option from a cost perspective. 

For ease of explanation, let’s consider an example of the Life Insurance policy purchase options for an Indian expat, or a Non-Resident Indian (NRI), based in the UAE. 

For an NRI, an onshore policy is one that has been purchased in India from an Indian-regulated Life Insurance company, and it typically pays out in Indian Rupees. When compared, a policy back home in India would probably cost about (10-20%) less than an equivalent value foreign currency policy bought in the UAE. 

Why the difference in cost? Several reasons, but a large part has to do with just market economies. India is a significantly larger market, with more policies purchased, and hence, policies are cheaper. 

Another relevant reason for some onshore policies being cheaper is that they assume you will remain a resident of the country for eternity. Offshore policies have to price mortality bearing in mind that you might continue to remain an expat and may move to parts of the world where mortality rates maybe higher. 

Needless to say, life expectancy in a war-torn third-world or developing country is shorter than say, a developed country, where simple things like sanitation and cleanliness alone impact life expectancy positively. 

But here are the CONS of expats buying onshore policies: 

Challenge 1: Repatriation of the payout to your loved ones 

If the worst happens, and your loved ones stand to receive a payout from your Life Insurance policy, repatriating those funds or receiving them in a foreign bank account can prove challenging. 

Challenge 2: Currency fluctuations 

If you have debt or liability in your country of residence (the UAE, in this case), but your Indian-purchased Life Insurance policy pays out in Indian Rupees, then currency fluctuation can become a significant loss factor. 

With the downward trend that the Indian Rupee (and many other currencies) has seen over the last decade and a half or so, an Indian Rupee Life Insurance policy purchased in 2005 is going to be worth a lot less in UAE Dirhams or US Dollars today than it was when you bought it. 

Are there any pros to buying an onshore Life Insurance Policy? 

Yes, if you have debt or liabilities that you want to cover back home, in Indian Rupees, then an onshore Indian Life Insurance policy is perhaps the better choice for you. 

Another case where an onshore Life Insurance policy can serve as a great option is if your beneficiaries are in your home country, or plan to return to your home country in the near future. 

They can then receive the payouts of your onshore Life Insurance policy back home (in India, or wherever home is for you), without worrying about foreign currency fluctuations, repatriating funds, etc. 

The Bottom Line 

In most cases, especially for long-term expatriate families in the UAE, it is most relevant to have an offshore policy that pays out in a global currency like the US dollar. 

If you have worked out your Life Insurance requirements correctly, an offshore, UAE-based policy will ensure that:  

  • Your payout will cover any debts and liabilities that would have to be settled should the worst happen to you 
  • You leave your loved ones a payout without any loss from currency fluctuations
  • You can leave money to your dependents anywhere in the world that they choose to receive it 

If your reason for purchasing Life Insurance is to provide your loved ones with a financial safety net, then as an expat in the UAE, an offshore, UAE-based Life Insurance policy is your best option. 

But if you are purchasing Life Insurance for one of these ten other reasons, then it is worthwhile to discuss the structure of your policy with your Life Insurance advisor to work out the best approach to serve your financial requirements. 

As always, I hope this article has helped! 

Have you got more questions? Feel free to leave me a comment below, or drop me a private message or email, and I’d be happy to help with more specific information. 

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