Life Insurance: Death Coverage Abroad Explained

Life insurance is designed to financially protect your loved ones in the event of your death. But what happens if you die while abroad? In most instances, life insurance will provide a payout if the policyholder dies overseas, but this is not always the case. The destination and cause of death may impact whether a life insurance company decides to pay out. If you're a globetrotter, make sure any life insurance policy you buy will cover an overseas death.

International life insurance

Types of International Life Insurance

There are various types of international life insurance policies available, including:

• Global term life insurance
• Whole life insurance
• Renewable term life insurance

Term Life Insurance

Term life insurance is a straightforward type of policy with level premiums and a consistent death benefit. Coverage typically ranges from 5 to 30 years, and the policy expires when the term concludes. Term life plans are popular among expats and global travellers due to their economical premiums and flexible coverage terms.

Whole Life Insurance

Whole life insurance provides lifetime coverage and a guaranteed death benefit. It tends to be more expensive than term life insurance but offers the peace of mind that comes with knowing that the death benefit will be paid out. Whole life insurance is often chosen by those concerned about their changing health and future eligibility.

Key Considerations for International Life Insurance

When considering international life insurance, it is important to:

• Carefully review the policy for limitations and exclusions, such as exclusions for high-risk activities or coverage restrictions for certain countries.
• Understand the claims process, especially if the insurer is based in a different country, as this can impact the complexity and duration of the process.
• Evaluate travel-related risks, including medical emergencies, natural disasters, and political instability, and ensure these are adequately covered.
• Assess the specific risks associated with the destination country, such as crime levels or limited access to medical care, and choose a policy that addresses these risks.
• Work with an experienced insurance professional who can help navigate the complexities of international insurance and ensure adequate coverage.

Death abroad exclusions

While most life insurance policies cover foreign deaths, there are specific circumstances when they might not. It is important to be aware of these exceptions, especially when travelling or living abroad. Here are some common reasons why a life insurance claim might be denied in the event of an overseas death:

Life Insurance Policy Lapse

The first thing life insurance companies will look at when a claim is filed is whether the policy was active at the time of death. If the policyholder failed to pay premiums, the policy will lapse, meaning there is no coverage and the insurer has no obligation to pay.

Material Misrepresentation

When assessing risk level and premiums, insurance companies consider the applicant's international travel history and habits, including countries visited, frequency of travel, duration of stays, and activities during these trips. A claim might be denied if the applicant was not truthful about these details on the application form.

Failure to Disclose Risky Activities

If the insured failed to disclose dangerous or extreme hobbies or activities, such as skydiving or base jumping, and died while engaging in these activities abroad, the insurance company can claim material misrepresentation and refuse payment.

Insufficient Proof of Foreign Death

Obtaining proof of death can be challenging for insurance companies when investigating overseas deaths, especially in less developed countries with poor infrastructure, limited access to technology, terrorism risks, or susceptibility to natural disasters. The records must meet the policy's requirements for beneficiaries to receive a payout.

Suspicious Death

If the cause of death is inconclusive, the insurance agency cannot determine claim eligibility. This may delay the claim as the insurer investigates the circumstances of the death.

Suicide

Life insurance policies typically include a suicide exclusion, allowing insurers to deny claims if the policyholder commits suicide within the first two years of acquiring the policy, regardless of whether the death occurs in the US or abroad.

Act of War

If the insured's death is considered the result of an act of war, terrorism, revolution, or insurrection in the area they were travelling, the insurer will likely deny the claim.

Extended Stay Abroad

A life insurer may deny a claim if a US policyholder was overseas for an extended period, generally considered to be six months or more, and had not disclosed their travel plans in advance.

Filing a claim

If the policyholder dies abroad, the beneficiaries must file what is known as a "foreign death claim". This process can be challenging, as it requires proof of death, which may be difficult to obtain in a foreign country. Here are the steps to follow when filing a claim:

• Notify the US Embassy: Report the death to the US Embassy in the country where the policyholder died. They can offer advice and assist with obtaining the necessary documentation.
• Obtain a Death Certificate: With support from the US Embassy, navigate the local government regulations to acquire the death certificate and other required documents.
• Gather Supporting Documentation: Understand the specific requirements of the life insurance policy and gather all the necessary documents within the deadline provided. This may include medical records, autopsy reports, and other proof of death.
• Make Necessary Arrangements: Decide on the burial or cremation arrangements. If cremation is considered, consult the insurance company first, as they may request an autopsy if the death occurred within the first two years of the policy.
• Submit the Claim: Provide the insurance company with the death certificate and all supporting documentation. Be prepared for potential delays or requests for additional information.
• Seek Legal Assistance if Needed: If the insurance company denies or delays the claim, consider seeking legal assistance to understand your options and protect your rights as a beneficiary.

It is important to note that life insurance policies have various exemptions and conditions that may impact the payout for a foreign death claim. These include the destination country, the length of stay abroad, the activities engaged in while abroad, and the cause of death. Therefore, it is advisable to carefully review the life insurance policy and understand its specific requirements and exclusions before filing a claim.

Travel-related risks

When living or travelling abroad, there are a variety of travel-related risks to consider that could impact your life insurance coverage. These include:

• Medical emergencies: If you are planning to work, study, or travel overseas for an extended period, it is important to review your policy to understand any limitations or exclusions. For example, some policies may exclude coverage for certain high-risk activities, such as extreme sports or adventure travel. You may need to purchase a specialised policy or add a rider to your existing policy to ensure you are covered in the event of a medical emergency.
• Natural disasters: Depending on your destination, you may need to consider the risk of natural disasters and review your policy to ensure you are covered in the event of an emergency evacuation.
• Political instability: Countries with high levels of political instability may require specialised coverage for kidnapping and ransom.
• Limited access to medical care: If you are travelling to a country with limited access to medical care, you may require additional coverage for medical expenses.
• Crime: If you are travelling to a country with high levels of crime, you may want to consider a policy that includes coverage for kidnapping and ransom.
• Pandemic-related restrictions: During a pandemic, travelling abroad is highly risky, and your destination will play a role in the claim evaluation, especially if you were aware of the restrictions.

Ultimately, it is important to carefully assess your needs and work with an experienced insurance professional to identify the best options for you and ensure you have adequate coverage while living or travelling abroad.

Country-specific risks

When it comes to country-specific risks, several factors come into play that can impact the coverage provided by life insurance policies. Firstly, the destination country's political and social climate can be a significant consideration. Countries with high levels of political instability, terrorism, or acts of war may be excluded from coverage or require specialised policies. This includes circumstances such as terrorism, revolution, or insurrection. Similarly, countries with poor infrastructure, limited access to technology, or susceptibility to natural disasters can complicate the investigation process for insurance companies, potentially delaying or complicating claims.

The activities in which the policyholder engages while abroad are also crucial. If the policyholder fails to disclose plans to participate in risky activities, such as rock climbing, skydiving, or base jumping, the insurance company may deny the claim, citing material misrepresentation. This is particularly relevant if the policyholder engages in these activities in a country with inadequate health care or high mortality rates.

It is worth noting that some countries may have specific legal and tax implications regarding the payment of death benefits. Consulting legal and tax advisors can help beneficiaries understand the regulations in the country where the policyholder passed away.

Additionally, the process of obtaining a death certificate and supporting documentation can vary depending on the country. Beneficiaries may need to navigate local government regulations with the assistance of the local embassy.

In summary, country-specific risks encompass both the political and social environment of the destination country, as well as the activities the policyholder engages in while abroad. These factors can influence the investigation process, legal and tax implications, and the ease of obtaining necessary documentation. Beneficiaries should be aware of these considerations when filing a claim to ensure a smooth and timely process.

Frequently asked questions