Insurance and its gaps: known limitation 1

This is general information about categories of cover, not advice on a specific policy, and policy wordings differ enormously between insurers and jurisdictions.

Insurance and its gaps: known limitation 2

Insurance is priced to be profitable for the insurer on average, so buying it for small risks is a losing trade repeated many times.

Insurance and its gaps: known limitation 3

Employer provided cover is convenient and ends with the employment, which is the moment it is most needed.

Playbooks / Risk

Insurance and its gaps

Insurance transfers risks that would be financially catastrophic and is poor value for risks that would merely be inconvenient, which means the useful question is never what am I insured for but which single event would do the most damage and whether anything currently covers it.

The rule

Most people are insured for the things that come bundled and uninsured for the things that would actually ruin them. The bundling is not a conspiracy, it is just what happens when nobody sits down and lists the failures.

The principle

Insure what you could not absorb. Self-insure what you could.

A five thousand dirham repair is an inconvenience, and paying an insurer to carry it costs more over time than carrying it yourself. A total loss of income for two years is not absorbable by almost anyone, and that is what insurance is for.

That single test reorders most people's cover immediately.

The four that matter for a property owner abroad

Health. Usually the one people have, often through an employer, which is precisely the problem: it ends when the job does, at the same moment residency does. Understand what happens to cover in the gap.

Income protection or critical illness. The largest uninsured exposure most working people carry. Your ability to earn is the asset funding everything else, including the mortgage, and it is the one nobody insures. If you were unable to work for three years, what pays the service charge.

Life cover sized to the debt, not to a round number. For a property owner the specific job is clearing the mortgage so the family is not forced to sell a leveraged asset in a hurry. Size it to the outstanding balance plus the costs of a forced sale, then add what dependants need beyond that.

Property insurance, and knowing which one you have. The owners association insures the structure through the service charge. That is not the same as contents cover, and it is not the same as landlord liability for injury to a tenant or damage originating in your unit. Owners frequently assume the association's policy covers all three. It generally does not.

The gaps that catch expatriates specifically

Cover tied to employment ends with employment. Cover tied to residency may lapse on leaving. Policies written in one country may not pay for events in another, and a policy bought in a previous posting may quietly no longer apply where you now live.

And the exclusion that surprises people most: rental income is not usually covered for ordinary vacancy. Loss of rent cover typically applies after an insured event such as a fire making the property uninhabitable, not because a tenant left. Vacancy is a risk you carry yourself, which is why break-even occupancy and the emergency reserve exist.

How to review it in an hour

List the events that would do real damage: death, long term illness, disability, job loss, a major uninsured repair, liability for injury. Against each, write what currently pays. The blanks are the answer, and there are usually two or three.

Then check the sizing on what you do have, because cover bought five years ago against a smaller mortgage and no children is cover sized for a different life.

The arithmetic

The test Could I absorb this loss without changing my life? yes -> self-insure, keep the premium no -> transfer it The grid, filled in honestly Event What pays? -------------------------------------------- Death life cover, sized to mortgage + costs of a forced sale + dependants Long term illness/disability income protection (the usual blank) Job loss cash reserve, not insurance Major repair reserve fund + own cash Liability to a tenant landlord liability (not the OA policy) Contents own policy (not the OA policy) Vacancy nothing. It is not insurable. Excess and premium raise the excess on small risks spend the saving on the large ones

Where it breaks

This is general information about categories of cover, not advice on a specific policy, and policy wordings differ enormously between insurers and jurisdictions.
Insurance is priced to be profitable for the insurer on average, so buying it for small risks is a losing trade repeated many times.
Employer provided cover is convenient and ends with the employment, which is the moment it is most needed.
Sizing life cover to a round number rather than to the actual liability leaves either a gap or years of wasted premium.
Critical illness and income protection are different products solving different problems, and the definitions in the policy decide whether a claim pays.
Vacancy and ordinary tenant default are generally not insurable, so no amount of cover substitutes for a reserve.

When to use it

Once, properly, with the grid filled in. Then after any change of job, country, mortgage, marital status or dependants, all of which change the sizing.

Run it on your own numbers

The Safe Withdrawal Rate does this arithmetic for you, in your currency, in about thirty seconds.

Open the calculator

Sources

Last reviewed 26 August 2026. Educational research, not personal advice. Disclosure standards.