Life Insurance For Expats: Us Coverage While Living Abroad

Life insurance is a crucial form of financial protection for expats and their families, but it can be challenging to obtain while living abroad. The process of purchasing or maintaining coverage becomes more complicated for non-US residents due to added rules, regulations, and practical considerations. This includes medical exams, complex application processes, and limited options for coverage. Furthermore, insurance companies view living outside the country as a higher risk, impacting the availability and cost of coverage. However, international life insurance policies are available and can provide global coverage for individuals with an international lifestyle. These policies are tailored to meet the unique needs of expatriates, offering peace of mind and financial security for individuals and their loved ones.

US citizens living abroad

If you're an American citizen living abroad and looking to take out a new policy, you'll need to do some research and can expect to find a limited range of options. Not all US-based life insurance companies offer policies to expatriates. However, some companies offer policies with optional "expatriate riders" specifically designed for US citizens living abroad, which may provide advantages like currency exchange protection or repatriation benefits.

If you're outside of the US, finding an insurance company to work with will be your biggest obstacle. Insurance companies assess risk, and they view living outside of the country as riskier to your mortality than staying local. Most insurers require you to be physically in the US when you sign your application and complete a medical exam, if needed. If you live more than six months of the year outside the country, you likely won't be able to get coverage from an American company. Even spending less than six months in another country considered dangerous might disqualify you from coverage.

If you know you want life insurance and are considering living outside the US, it's best to get a policy before you move. The application process can take six weeks or more, so it's essential to start early.

If you already have a life insurance policy and move abroad, your policy will likely remain valid as long as you continue to pay your premiums. However, it's crucial to notify your insurer about your change in residence to ensure your policy remains compliant with local regulations.

US citizens with plans to move abroad

If you're a US citizen with plans to move abroad, there are a few things you should know about your life insurance options. Firstly, it is important to distinguish between domestic life insurance policies and international life insurance policies. Domestic life insurance plans typically do not cover you if you live permanently outside the United States. Some domestic policies may cover you if you are travelling or living abroad for a short period, but it is essential to check the terms and conditions of your policy to avoid violating any travel restrictions.

If you already have a life insurance policy in the US and plan to move abroad, it is crucial to notify your insurer about your change in residence. Different insurers have different rules about international residency, and failing to inform them may invalidate your coverage. Some policies may maintain your coverage, while others may reduce benefits or even cancel your policy. Additionally, some countries have restrictions on holding financial products from foreign companies, so it is important to consider local regulations in your new country of residence.

If you are seeking new coverage while already living abroad, you may find a limited range of options as not all US-based life insurance companies offer policies to expatriates. The application process may also be more complex, as it may involve a rigorous underwriting process, medical examinations, and requirements to be physically present in the US at certain points in the application process.

To overcome these challenges, you may want to consider international life insurance policies, which are designed specifically for individuals living and working internationally. These policies provide global coverage and pay the death benefit to your beneficiaries even if you live or die overseas. International life insurance policies offer various coverage options, including term life, whole life, and renewable life insurance. They also allow you to pay premiums and receive payouts in different currencies, such as US dollars, British pounds, or Euros.

When choosing between domestic and international life insurance, it is important to consider your specific needs and circumstances. If you plan to maintain strong ties to the US, you may prefer a domestic policy that aligns with your financial and family situation. On the other hand, if you anticipate frequent travel or permanent residence abroad, an international life insurance policy may offer more comprehensive coverage and peace of mind.

Non-US citizens with US ties

Non-US citizens with significant business, financial, and family ties to the US may be eligible for US life insurance coverage. These policies are typically highly specialised and designed for high-net-worth individuals with complex affairs in multiple countries.

Eligibility

To be eligible for US life insurance, non-US citizens with US ties must demonstrate:

• A significant connection to the US, such as real estate, business ownership, equities, or other assets, or direct family members who are US citizens.
• A US bank account to pay policy premiums.
• Sufficient assets or income to pay policy premiums.
• A US address, which is typically needed to obtain life insurance for correspondence and legal requirements.
• A Social Security number or Tax Identification Number for administrative and tax purposes.

Underwriting Process

The underwriting process for non-US citizens with US ties can be complex and involved. Applicants should be prepared for an extensive interview to determine insurability, including questions about their ties to the US. The application process may need to be completed on US soil.

Policy Options

There are fewer policy options available to non-US citizens with US ties, and premiums are typically higher due to the higher risk and underwriting complexity. Permanent life insurance, particularly whole life insurance, is more suitable for wealth building and asset preservation. These policies build cash value at a steady rate over time and can be used for estate planning and wealth transfer.

Benefits of US Life Insurance for Non-US Citizens with US Ties

US life insurance can provide several benefits for non-US citizens with US ties, including:

• Death benefits that are generally exempt from federal estate taxes, helping to bridge the disparity between the estate tax exemption for US residents and non-residents.
• Diversification of financial portfolios and protection against economic downturns, fluctuating exchange rates, and geopolitical risk.
• Additional layer of protection for assets, as life insurance policies are generally protected from creditors and bankruptcy.

US citizens with international beneficiaries

US citizens living abroad can get international life insurance, which provides global coverage for them and their beneficiaries. This type of insurance is designed for expatriates and global citizens who live and work internationally and thus have unique life insurance needs. While US citizens and permanent residents have access to a wide array of policy types, options for expats and foreign nationals are far more limited.

International life insurance policies work similarly to other life insurance policies, with the policyholder paying regular premiums to the life insurance company, which pays a death benefit to the named beneficiaries if the policyholder passes away. Depending on the type of policy, premiums can be paid and benefits received in a foreign currency. Importantly, these policies pay the benefit even if the policyholder is living or working abroad when they pass away. However, there may be limitations and exclusions, such as for deaths occurring in war zones, so it is important to carefully review the terms of the policy.

US citizens living abroad can also get term or permanent life insurance, though this is more complicated. Term life insurance is more affordable and provides coverage for a fixed term, usually 10 years, and is often purchased by people with a lot of expenses, such as a mortgage, who do not want to leave their families unable to pay if they die suddenly. Permanent or whole life insurance is more expensive and lasts the duration of the policyholder's life. It also has a cash value that grows over time, which can be used as a financial instrument.

If you are a US citizen with an existing life insurance policy and you move abroad, it is important to notify your insurer about your change in residence. Policy terms and conditions often have clauses about geographic limitations, and failing to notify your insurer could invalidate your coverage. Insurance companies consider some foreign countries to be riskier places to live due to limited healthcare access, disease prevalence, political instability, or other factors.

When choosing an international life insurance policy, it is important to consider the financial protection you want for your family, as this will determine the type of policy you get. If you are looking for income replacement while living abroad, a term life insurance policy is typically the most cost-effective option. These policies protect you for a limited period and are easier to get than permanent life insurance policies. If you want coverage for wealth building and asset preservation, permanent life insurance, particularly whole life insurance, is a better option. These policies build cash value over time and can be used for estate planning and transferring wealth to children and family members.

When choosing an international life insurance policy, it is also important to consider the limitations of domestic life insurance policies. In many cases, a life insurance policy purchased in the US will not pay out if the policyholder moves abroad. Additionally, if you move overseas without informing your insurer and then pass away, your claim may be denied due to material misrepresentation. International life insurance provides global coverage and ensures that your beneficiaries will not have to deal with the delays and complications associated with covering an international life using a US domestic plan.

Non-US citizens living in the US

Visa Holders

If you are a visa holder, your ability to get life insurance coverage will depend on the type of visa you have. Some of the most commonly accepted visas include:

• E – employer-sponsored immigrant visa
• H1B – temporary work visa for someone in a specialty occupation
• K – nonimmigrant visa for a fiancé(e) of a US citizen
• L – temporary work visa for an intracompany transferee
• O – temporary work visa for someone with extraordinary ability or achievement
• TN and TD – visas for Canadian and Mexican NAFTA workers

Student visa holders will find it difficult to get a life insurance policy, but it may be possible if stringent requirements are met.

Documentation

Regardless of your visa status, you will need to provide the following documentation:

• A US bank account
• Sufficient assets or income
• A US residential address
• Social Security Number/Tax ID

Other Requirements

In addition to documentation, you may need to meet other requirements, such as:

• Substantial presence in the US (typically at least one year, but some carriers require up to five years)
• Significant interest in the US (e.g. owning a home or business, being married to a US citizen, etc.)
• Country of residence (some countries may be restricted due to US legal restrictions or international regulations)

Types of Coverage

As a non-US citizen, you will likely find it easier to get temporary term life insurance than permanent whole or universal coverage. Term life insurance is more affordable and provides coverage for a limited period, usually 10 to 30 years. Permanent life insurance, on the other hand, lasts a lifetime and is more expensive due to its cash value component.

Frequently asked questions