With more and more Americans choosing to live abroad, we felt that it is important to touch on the subject of securing life insurance for expats. In this article, we would address issues as to why there needs to be a separate category, what things companies are looking for and what is the easiest way to secure a policy.
Please feel free to reach out to us and let us review your unique situation. We are here to answer any questions you might have and to guide you through the process of securing a piece of mind.
Table of contents:
Why does residency matter
The number of Americans choosing to live abroad is growing. With the power of globalization and the internet, more people have the freedom to work and live virtually anywhere in the world. We won’t bore you with statistics and forecasts, that’s not why you are reading this article. We would, however, mentioned that where you live and travel makes a difference in your life insurance application.
There are many countries that are less developed compared to the US. There could be concerns about public health, safety, kidnapping, terrorism, military actions and so on. Just check out the alarming guide published on the subject.
Actuaries consider many countries to pose a higher risk to one’s life. Typically, life insurance carriers divide the list of countries into A, B, C, and D category. A is the best category. Generally, companies are accepting and approving life insurance for expats if they are living in one of A category countries. Think of residency as one additional criteria companies are taking into consideration. Past travels and future plans are almost always part of your life insurance application.
Every carrier has a different view on which country belongs to which category and puts a different weight on the question of travel. This is why is important to work with an insurance broker, who understands the complexity of residency.
What insurance companies are looking for
As we mentioned, residency is simply an additional underwriting factor companies are considering. Here is a list of things a company would ask when reviewing an application.
Residency status – companies would ask what is your immigration status. Are you a U.S. citizen just traveling abroad or are you living abroad? We’ve dedicated an entire article about how insurance carriers view residency in terms of travel and insurance. You can review it here
In this post, we will turn our attention specifically to US citizens/permanent residents who are traveling abroad.
Are you traveling less than 3 months per year to A category countries:
If this applies to you, you would be able to secure a life insurance policy with just about any carrier. They would still need to know the length of past and future travels, as well as the countries you’ve visited or are planning to.
We’ve recently worked with a couple planning to tour Europe for their anniversary. The husband did not have sufficient coverage and he was able to fill out the application and complete the exam prior to leaving. For extra piece of mind, he purchased conditional/temporary insurance. This option gave them the security that if something happened to him while traveling, their 2 kids will be financially taken care of.
Just for clarification – condition/temporary insurance is coverage offered by carriers while your application is in underwriting. It is available after you complete your medical exam. Please send us a message if you have questions about conditional insurance.
Are you traveling abroad for more than 3 months per year to A category countries:
In this case, the companies would have additional questions when underwriting your application:
Which country (ies) are you planning to visit or reside in? They would want to make sure it is a county or territory that has been deemed “safe”. As we mentioned above, every company has its own category.
Are you traveling abroad more than 3 months per year to a B category county:
If this applies to you, please reach out to us immediately. Applications would be considered on an individual basis.
What separates us from other insurance brokers:
We would ask the right questions during our conversation. Then we would reach out to the companies we deem as best fit directly. That way, we would know exactly what should we expect submitting an application. This is an extra step we take to save you time and hassle down the road.
Financial ties to the US – this is another thing companies would be looking out for when underwriting your life insurance application. They want to know who will suffer a financial loss if something were to happen to you. Do you still have any financial obligation tying you to the US? For example house, dependent family, business and etc.
Life insurance needs to make financial sense. It is intended to put your beneficiary in the same financial situation prior to your passing. You can’t purchase a policy without having a financial reason (family or business protection, estate planning, and etc). This is also why companies would ask for your occupation, annual income, and net worth.
Occupation – this is another factor that they will take under consideration for several reasons:
- Is it dangerous; does it pose a higher risk – like a search or rescue flight pilot for example
- Does your occupation put you in a different class
* Many companies may not offer coverage on missionaries, journalists, political officials, and their families.
Available options for life insurance for expats
Depending on your unique situation and your needs, you can choose from 2 available life insurance options:
These types of policies are pretty straight forward. You select the coverage amount you need and qualify for and the length of protection.
For example: $500,000 coverage for 20-year term. This means that for the next 20 years, you would have a fixed monthly/annual premium. As long as the premiums are paid, the company will pay out to your beneficiary/ies $500,000 should you pass away. Typically, these policies are at a lower cost and they do not offer cash value build up.
there are some life insurance companies that will offer living benefits. Simply put, living benefits means that you might be able to use your life insurance death benefit while still alive if you are ever diagnosed with heart attack, stroke, invasive cancer and etc. Please reach out to us to get more information and to see if you qualify for a policy with living benefits.
There are several different variations of permanent policy. They could be complex based on what your needs and what you want to achieve. Their main objective is cash accumulation and/or lifelong protection. They are more expensive compared to the term products, but their features make them a very powerful financial tool.
Naming a foreign national as a beneficiary on your life insurance policy
It is not uncommon to want to name someone living outside of the US as a beneficiary to your life insurance policy. It is possible and again, we’ve dedicated an entire article on how to name a foreign national as a beneficiary that you can check out.
But there’s a catch
If you live abroad and want to name a foreign national as a beneficiary, why are you looking into a US-based company? Please be ready to answer that question. Do you have any financial ties to the US? Are you living permanently abroad or are you planning to move back? There are many different situations. When submitting an application we would need to address that question.
Need to be in the US for the entire process
This is a big one. Regardless of the option, coverage amount, company you select, you NEED to be in the US for the entire life insurance application process:
- Underwriting / medical exam
- Issuance/ policy acceptance
Depending on the company and your unique situation, an application could take anywhere from 3-8 weeks. Please allow enough in the US for carriers to review your application.
Need to have a US address and a bank account
Your life insurance policy would be based on your address and the carrier would follow the requirements of your residence state. Also, they would require a US bank account to set up the monthly premium deductions, if paying on monthly basis. If you decide to pay annually, some carriers would still require the initial payment to be auto deducted out of your checking account.
- Understand your needs – this is always crucial when considering life insurance. Why are you looking? What or who do you want to protect with a policy. Knowing your “why” would help us better determine the best suited for you product and coverage amount.
- Please don’t just pick up a rounded number, let us go over your actual needs and provide you with a recommendation
- Be honest and upfront with us – this will help out on several levels:
- 1st – it will help us match you with the carrier best suited for your situation and save you the hassle of applying with the wrong company.
- 2nd you want to make sure that when applying you’ve given the carrier the correct application. You don’t want them to have any reason to contest the claim, should you pass away during the first 2 policy years and leave your beneficiary without coverage.
- 3rd it is considered a fraud to make false statements to an insurance company. It could be punishable by law.
4. Answer the exact questions on the application – Now this could be tricky. What we mean by that is just answer to the questions asked.
If you had a DUI conviction 6 years ago and no moving violations since then and the question on the life insurance application reads:
“In the past 5 years, been convicted of 2 or more moving violations, driving under the influence of alcohol or other drugs, or had their driver’s license suspended or revoked?”
Your answer needs to be NO
5. Work with an insurance broker – this is important because brokers have a wide range of carriers to choose from. We know the guidelines and which carrier is best suited to offer life insurance coverage for expats.
What to expect when reaching out us
We wanted to add this extra section to set the releasing expectation of what you should expect when you reach out to us. As we mentioned earlier, we are very particular at what we do. We would ask all the questions and take the time to review your situation and match you with the best carrier for you. Again, this would save you time, hassle and money in the long run.
We hope you find this guide helpful. We know you might have a lot of questions when searching for life insurance for expats and we are here to help. Just reach out to us via the quote form on the page, by leaving a comment below or simply giving us a call.