Mistakes when buying life insurance as a visa holder

We have worked with thousands of visa holders to find life insurance in the US with top-rated providers. We have noticed multiple crucial mistakes when buying life insurance as a visa holder and wanted to share them so you can avoid them. 

Before jumping into the topic, we wanted to point out that we specialize in life insurance for foreign nationals, and we have been for over a decade. Simply reach out if you have a question.

Apply to the wrong company

We have seen mistakes all too often. Life insurance companies have additional underwriting guides when it comes to reviewing the application for a foreign national. As a non-US citizen, you will need to meet an additional set of criteria to get your coverage approved. Unfortunately, many agents may not be familiar with the exact guidelines, and this can cost you.

Applying with the wrong company can cost you more money.

Some companies will simply not offer the best health class you might qualify for solely due to your citizenship. To give you an example, a client we worked with had purchased life insurance through Costco. He thought he was doing the right thing, as they offered him an additional discount.

While this might be a great option for some, it was not for him. He would have paid more than $40 per month for the same coverage we were able to help him with. The reason is that the company that Costco works with doesn’t offer the best life insurance for visa holders.

If you do not apply with the right company, you can be declined.

We have worked with many clients—F-1 visa students, for example—who have been declined solely due to their immigration status. When it comes to visa holders, the right life insurance company matters. 

List minors as beneficiaries of their life insurance.

While we will advise you against listing minors as beneficiaries on your life insurance, this is particularly important when it comes to visa holders. Why? Well, in most cases, visa holders do not have immediate family members in the US. This means that it will be much more difficult for family members to establish guardianship over the kids and ultimately file for the death benefit of life insurance.

The process can be lengthy and traumatizing for the kids.

Many visa holders do not have a trust set up

Following on from the previous point, having trust is important for US citizens, but it could be particularly important to visa holders.

Listing who will be your kids’ guardian, who will be responsible for your assets, and how you want them to be handled can be invaluable to your family. Especially if your immediate family members do not live in the US, may not have a visa, or even speak the language.

“I don’t think life insurance is available due to citizenship”

We have heard this one too many times. Clients have told us that they have not secured life insurance sooner because they did not think this was an option for them.

Please note that not every life insurance company will approve your application simply because of your citizenship. As we have said, many will underwrite your visa before they underwrite your health.

The key is to apply with the company that will offer you the best value and the easiest approval process. 

Some companies will offer term insurance to non-US citizens, others will offer only permanent life insurance, and some will offer both to visa holders (and some to undocumented immigrants).

Do not consider their tax obligation

How is that related to life insurance? Well, it is. In the US, a death benefit from life insurance is generally income-tax-free for the beneficiary.

However, this might not be the case if your beneficiary lives outside of the US and might be taxed on his or her country of origin and residence. 

Even though most countries have tax treaties with the US and recognize the proceeds of life insurance as income tax-free, we will still highly recommend you look into it and see where your country stands on it.

Fail to utilize cash-value life insurance

While on the topic of taxes, many of the clients we work with do not know that life insurance can also build cash value. You can access the money tax-free through loans or withdrawals. This is a very attractive option for people who do not qualify for any retirement planning due to employment or citizenship. Cash value life insurance is also an attractive tool for many visa holders, such as H1B visa holders or TN visa holders, as their income may disqualify them from Roth IRAs or similar accounts.

Foreign nationals can use permanent life insurance as a way to preserve wealth across borders.

The key takeaway is that you have options, and life insurance can help you in more than one way.

Do not use online calculators or recommendations for the coverage amount

Many of the visa holders we work with will select a flat amount of coverage, such as $1 million, without really considering their needs.

There are several ways to calculate the need for life insurance. You can ask your agent for a recommendation, or even go online and use many of the free calculators. This will give you a general idea of what your family might need, should you pass away unexpectedly.

Yes, calculating how much your family might need should you die is not the most pleasant task, but it is wildly important.

Do not call their agent for a visa or immigration status change

As your visa status changes, there might be additional companies that can offer you insurance. For example, some companies offer life insurance with living benefits. Living benefits allow you to use your life insurance death benefit while you are still alive. In other words, you do not have to die for your policy to pay out.

In addition, changing visa types may mean that there could be better-priced life insurance available. For example, we worked with a client who switched from F-1 to H1B visa. We were able to replace his existing insurance with higher coverage, a longer duration, and a better rate.

Do not secure life insurance because you are not sure if they will remain permanently in the US

This is a common mistake, and we completely understand its logic. Many clients are unsure if they will remain permanently in the US or have to move shortly. Therefore, buying life insurance may seem like a waste of time. We have learned that life happens regardless of whether you are in the US or abroad. Most of the plans offer worldwide coverage, giving you extra peace of mind that you are protected. 

Compare US life insurance to the plans available in their country of origin

We’ve been asked many times if there are US plans that operate in a certain way. We will try to offer life insurance that may have similar features; however, please note that life insurance in the US might work differently compared to the life insurance plan in your country. 

A helpful tip: ask questions.

While this is not a mistake per se, we will strongly urge you to ask questions. Buying life insurance may be confusing, as there are many options for coverage and different policy designs and features, so it is hard to know which is the best life insurance plan for a visa holder. To make it a bit easier, we have answered the most common questions we have received over the past decade of working with foreign nationals and visa holders.

There you have them: 10 of the most common mistakes we’ve seen when buying life insurance as a visa holder. Have you successfully avoided them when planning for your financial future?