What happens to your South African insurance policies when you move abroad?

Embarking on a new adventure abroad is exciting, but have you considered how it impacts your South African insurance policies? While it’s likely that you’ll cancel your vehicle and home contents insurance policies, if you have none of these assets remaining in South Africa, you’ll have to consider what happens to your other policies, such as life and retirement annuity policies. Just in case you hadn’t given this much thought, we put together this handy guide that covers most of your frequently asked questions regarding your South African insurance policies, and your emigration.

First, let’s talk about your life insurance policies after emigration:

Does South African life insurance cover your death overseas?
Whether your insurance covers your death overseas depends on several factors, such as:

1. Your specific policy: Each life insurance policy has its own terms and conditions, so you will need to carefully read your policy document to see if it provides overseas coverage. Look for sections dealing with “geographical scope” or “exclusions.”
2. Exclusions: Most South African life insurance policies exclude coverage in specific countries due to high risks associated with war, civil unrest, or dangerous activities. Be sure to understand these exclusions as they could void your claim.
3. Nationality: Some policies extend coverage to all nationalities worldwide, while some limit it to South African citizens or specific regions. This information should be clearly stated in your policy document.
4. Duration of your stay overseas: Some policies limit overseas coverage to short trips, while others offer more comprehensive cover for extended stays or even permanent residency abroad.
5. Cause of death: Certain policies might exclude death due to specific activities like high-risk sports, even if you’re within the covered region.

What happens to your South African life insurance when you move abroad?

Answering this question depends on a number of factors, mainly:

1. Your specific policy:

• Overseas coverage: Read your policy documents carefully to determine if it offers overseas coverage and any limitations like specific excluded countries or activities.
• Duration of coverage: Some policies might limit coverage to temporary trips, while others extend it to permanent residency.
• Adjustments: Some companies allow adjustments like changing beneficiaries or premium amounts while abroad, while others might not.

2. Your individual circumstances:

• Residency status: Depending on your new residency status, some policies might become invalid, require increased premiums, or face tax implications.
• Nationality: Some policies only cover South Africans, while others offer broader coverage based on the insured’s or beneficiaries’ nationalities.

Here’s a breakdown of potential scenarios with regards to your life insurance policy after emigration:

1. Your life policy remains valid with adaptations:

• Coverage limitations: You might have limited coverage based on location, duration, or specific activities.
• Increased premiums: Certain insurers might charge higher premiums for overseas residents due to increased risks.
• Claim process: Expect additional documentation and potential delays for overseas claims.

2. Your life policy needs adaptations:

• Adjusting coverage: You could discuss changing beneficiaries, decreasing/increasing cover, or adding riders for specific needs.
• Tax emigration: This process changes your tax residency status in South Africa, which might affect policy terms.

3. Your life policy invalidates:

• Specific exclusions: If your policy excludes your new residence or your activities there, it might become invalid.
• Non-payment of premiums: Maintaining premium payments from a South African account is essential, and if difficulties might arise, your policy might lapse.

Here are some steps that you can take:

1. Contact your insurer: Discuss your specific policy and its applicability abroad. Get clarity on coverage, premiums, claims, and potential adaptations.
2. Seek professional advice: A financial advisor familiar with South African life insurance and international financial planning can offer valuable guidance.
3. Investigate alternatives: If your current policy doesn’t suit your needs, explore alternative life insurance options available in your new country.

Can South African life insurance be paid to someone abroad?

Yes, the benefits from your South African life insurance can be paid out to someone abroad, but there are some important things to bear in mind:

1. Beneficiary’s residency:
South African bank account: While some policies allow direct overseas payments, most require a South African bank account for the beneficiary. If your beneficiary doesn’t have one, they can open one specifically for the payout.
Financial emigration: If the beneficiary has financially emigrated, the payout might be subject to additional regulations and tax implications.

2. Policy terms:
Overseas coverage: Not all South African life insurance policies cover death overseas. Check your policy documents for specific exclusions or limitations related to location.
Claim process: Expect additional documentation and potentially longer processing times for overseas claims.

3. Financial limits:
Exchange control: South African residents have an annual foreign exchange investment allowance. If the payout exceeds this limit, tax clearance from the South African Revenue Service (SARS) might be needed.
Tax implications: Depending on the beneficiary’s residency and tax status, the payout might be subject to taxes in their country.

Now, let’s talk about what happens to your retirement policies after emigration:

1. Retirement annuities:

Can I cancel my retirement annuity in South Africa?

Unfortunately, you cannot simply “cancel” your South African retirement annuity (RA) even if you emigrate. However, you have the option to wait and withdraw after ceasing your tax residency in South Africa. If you emigrated on or after March 1, 2021, and have been a tax non-resident of South Africa for an uninterrupted period of three years, you can withdraw your entire RA benefit. You’ll need to provide documentation confirming your non-tax resident status.

Read more: South African Retirement Annuities: what you can do with them before and after emigration?

What is the tax on retirement annuity withdrawal in South Africa?

Withdrawing from your retirement annuity is going to attract SARS’ attention, unavoidably. Here’s what you need to know:

• Early withdrawal from South African retirement annuities
• Tax implications of emigration on your South African retirement funds

2. Living annuities:

Can my living annuity be cashed out in South Africa?

No, a living annuity cannot be cashed out in South Africa. This is because a living annuity is a type of financial product that is meant to support you financially during your retirement with income generated from the investment of your savings. As such, it is not possible to take a lump sum withdrawal from the capital you have invested into the living annuity.

Read more: What happens to my living annuity if I emigrate from South Africa?

FinGlobal: get expert assistance with your SA retirement annuity withdrawal

If you need help cashing in your South African retirement annuity after emigration, FinGlobal is ready to assist. We’ve helped thousands of clients in more than 105 countries to unlock their retirement savings, and transfer the proceeds abroad. We can assist with every aspect of your financial transition, including tax emigration, tax clearance and international money transfer from South Africa.

To get started with our trusted, convenient services, simply leave your contact details below and we’ll be in touch to start your free, no-obligation consultation.