Since touching down in Singapore, you may have been tied up finding a home and the right international school for the kids. With the busyness of settling in, you may not have had time to check on the extent of the benefits that are offered by your company. Here, Andrew Talbot of Expat Financial Planning, part of Globaleye Group, discusses the coverage of death-in-service benefits and what you need to take note of.
What does a death-in-service benefit consist of?
It pays out a lump sum to your family, usually around three or four times your annual salary, if you die while working for your company. Most companies’ death-in-service benefits are provided through an insurance scheme. The cover is normally offered free-of-charge as part of an employee benefits package and can go some way towards protecting your loved ones financially should you die while you are employed.
What should I look out for?
There can be some problems with the structure of certain schemes. The cover of the life insurance provided depends on the terms and conditions of insurance company. These are usually set to by the local office and may be different to what you would expect in your home country.
For most structures, you are allowed to nominate who your beneficiaries are and the death benefits will then be paid directly to them. Others may operate a little differently; if you die, the insurance company will pay a cheque for the amount of coverage to your company and then your company will pay it to the estate. The estate will then need to decide how this is split, depending on the will.
This can immediately cause some problems:
- Probate: What if you don’t have a will? It will mean that you’ll need to go through probate. In Singapore, this can take as long as a couple of months. During these months, your family will not have access to insurance funds. If your family decided to leave the country and return home, they will need to liaise with an administration department that is a long way from where they now live.
- Succession and forced heirship: There can be succession problems; it may fall into forced heirship rules that exist for certain nationalities. If you want your wishes to be observed after your death, then you will need to state this clearly in a will.
- Tax: There may also be certain death taxes to pay. For instance, a UK citizen’s worldwide estate is subject to inheritance tax. Your company death-in-service benefits will therefore go into the estate and potentially be taxed at 40 percent.
- Plan: If you have a company death-in-service benefit, then you need to check with the administrators what the status is and then plan accordingly. Adding a nomination of beneficiaries will solve the above problems.
So, is it enough?
With death-in-service benefits, if you were to move or lose your job, through redundancy or dismissal, for example, any benefits may be lost. Replacing this level of cover may not be easy, particularly if you were in poorer health, which could then leave your family at risk should anything happen to you.
For this very reason, death-in-service insurance may not be sufficient to cover all of your needs. It’s worthwhile to consider additional cover in the form of life insurance policies. Find out more about the insurance you need as an expat now.
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