Having a new expatriate life with your family in Vietnam can be a mixture of excitement and challenge. Even if life insurance is optional for you as an expatriate family in Vietnam and although you already have bought a life insurance policy from your home country, it is still worth considering having an additional international life insurance policy as circumstances in your life change all the time and they can perhaps be very different as you relocate to a new country.
Here we have put together a practical guide about the ins and outs of individual life insurance in Vietnam.
Table of contents
Life Insurance Regulation in Vietnam
Vietnam is a country that is fairly new to life insurance with only 18 life insurance companies with 17 of them being international life insurers and only one local life insurer. The Insurance Supervisory Authority (ISA), which is part of the Ministry of Finance (MOF), assists the MOF in supervising the insurance business and market in Vietnam.
Cost of Life Insurance Policies
According to Vietnam’s Ministry of Health, a newborn girl can now expect to live about 70 years, placing Vietnam on par with other Southeast Asian nations such as Indonesia, the Philippines, and Thailand.
The overall mortality rate of Vietnam is currently 6.418% in 2020. Mortality rates are uneven throughout the country. In cities, such as Hanoi and Ho Chi Minh City, mortality rates are low, approaching those of some European countries. But, in some provinces, mortality rates are among some of the world’s highest. Urban development of amenities also plays a key factor that affects the mortality rate which in turn influences how much the premium of life insurance policies are going to be in Vietnam.
Life Insurance Types
In Vietnam, there are many types of life insurance, namely, term life insurance, whole life insurance and endowment life insurance from local life insurance companies and international life insurance firms. The most popular type of life insurance in Vietnam for expatriates is term life insurance because it is the simplest and least expensive option and can also have international coverage. Term life insurance is the most suitable type of life insurance that you can have with you to protect your loved ones. It is a type of life insurance which pays out a lump sum in the event of death during a specific term. The benefit amount and the term can be tailored to fit your specific needs.
In Vietnam, term life insurance has a range of different term lengths available and pays a lump sum if your premature death occurs during the coverage period. If your death does not take place during the period of coverage on a term life insurance plan, you will not get any of your paid premium back.
Premiums are fixed for your policy term which means that they will not increase with age.
Term life insurance is designed to protect your dependents in the event of your premature demise. It is meant to pay off expenses such as mortgage and your children’s tuition fees.
Premiums are calculated based on age and also your medical history. Women typically pay a cheaper premium compared to men.
You need term life insurance if you desire one of the following: protect your family, your own personal cover or your business.
• How much life insurance coverage do you need in Vietnam?
The key to calculating the amount of coverage for life insurance is to use your annual income as a starting point. As a golden rule, coverage of a life insurance policy in Vietnam should be approximately 10 times your annual income. This rule allows you to offer 10 years’ worth of your income for your loved ones for their daily living costs.
• How long would the term of life insurance coverage be for you in Vietnam?
In Vietnam, while you can select a period of 5 to 35 years for your term life insurance policy. Ideally, the number of years your coverage would last should be based on the number of years it takes for your dependents to be on their own financially. For example, if you are about to have a newborn baby, your coverage should have the term of approximately 25 years giving you cover to an age where your child is hopefully financially independent!
Always check the insurers’ policy conditions to ensure that your specific pre-existing medical condition is covered and they do not have any exclusions for that condition.
Note that with individual life insurance, your medical history is assessed when you set up your cover.
This means that if you do have a pre-existing medical condition, you may have an exclusion that is specific to you.
Additionally, select a level of benefit that would cover your liabilities and consider a multiple of your annual income as your insured amount.