Life insurance is designed to provide our loved ones with peace of mind. It will be there for them when we can’t. In most cases, we select our closest relatives as a beneficiary. However, what happens if we want to name a foreign national as a beneficiary on life insurance?
Can we do that and how would he or she receives the money. In this post, we will go over some of the basic terms of selecting a beneficiary and helpful tips to ensure everything is in good order.
What we will cover
- What is an insurable interest and why does it matter?
- Your residency status
- Scenarios affecting the life insurance process
- How to file a death claim
- How will the beneficiary get the money
- Insiders tips [please review]
Before we dive in, please know you can send us any questions you may have. You can reach out to us by filling the quote form, send us a message or give us a call. We specialize in helping foreign nationals and their families find the coverage they need.
What is insurable interest?
Selecting a beneficiary should not be a difficult decision. The main thing that you need to keep in mind is that a person needs to have an insurable interest. It is one of the factors companies are looking for when reviewing one’s application for life insurance.
Most simply put, the beneficiary must suffer some form of financial loss of your death. Some of the most common examples of people named as beneficiaries are spouse, child, fiancee, etc. The same rule applies when selecting a foreign national as a beneficiary to your U.S. life insurance.
Tom is supporting his family in Mexico by sending them money. If he passes away, the transfers will stop and his family will suffer financial hardship. This constitutes insurable interest. In many cases, a simple note to the underwriting department explaining why naming this particular person as a beneficiary is helpful.
Your residency status
Your current residence also matters. For the purpose of life insurance, residence means a mix of your citizenship and country of residence
- Are you a permanent holder / US citizen living in the US (please review our guide for more information)
- Are you an expat living abroad
- Are you living in the US on a visa (such as H1B, International student or etc)
- Are you living in the US as an undocumented immigrant (expired visa or without any visa)?
Scenarios affecting the life insurance process
Your beneficiary would fall into one of the categories below. There are different guidelines an options, based on the situation:
- Your beneficiary is a foreign national, living in the US. The most common example is if your spouse if foreign-born.
- Your beneficiary is living in another county (please read below).
How to file a death claim
Filing a death claim is designed as a very simple process. The life insurance companies understand that this is a very difficult time for everyone involved. Therefore, they are trying to make the process as easy as possible. The main things that the beneficiary needs are a death certificate, proof of identification, and policy information.
They will contact the life insurance carrier and notify them of the death and file a claim. The company will send them a death claim package. Once the carrier receives the complete death claim package back, they will review it, confirm the information and issue a payment. To ensure timely handling, please ensure that the information is 100% complete and accurate. Any going back and forth to clarify uncertainties would only slow down the process.
Please note that if the cause of death is not yet determent, the life insurance companies will wait until any following investigation is complete.
How will they get the money?
By far, this is one of the most common concerns and the most frequently asked question. Please be assured, carriers understand that the world is globalizing. They are trying to keep up with the change and work towards simplifying the process of a death claim. Typically, there are 2 possible scenarios:
- Your beneficiary has ties to the US and is able to come into the country – this is the easiest and probably the fastest way for him or her to receive the life insurance proceeds.
- Your beneficiary lives in another country – this is still OK. Here are the guidelines if your life insurance beneficiary lives in another country.
There are things you can do to minimize complications when naming a foreign national as a beneficiary to your life insurance [insiders tips]
The first thing is to have the beneficiary’s complete information listed on the policy.
For example, if you only include my sisters, it will be confusing for the insurance company it will make the process of filing a death claim longer.
In order to avoid any delays, please include the following information in the beneficiary section of your life insurance application:
- Full legal first and last name
- Their Date of Birth
- Social Security Number, if they have one
- Phone number
- Benefit percentage – this is used if you want to have more than one beneficiary. For example, you have 2 brothers, and you want each one of them to receive 50% of the death benefit.
Please don’t worry if you don’t have your beneficiary’s complete information at the time of application. Do not let this stop you from securing a life insurance policy. You can always call or e-mail us and we will send you a one-page form to update their info.
Also, if you decide to name a foreign national as a beneficiary on your life insurance policy, please let them know.
It seems simple enough, but we’ve encountered cases where the beneficiary doesn’t know which company to contact. Submitting a death claim without the policy information can be challenging. However, if you are a foreign national could be even more difficult. Not to mention that there may be a language barrier. Please provide your beneficiary or a trusted person, if they don’t speak English, with the following information:
- Life insurance company name and phone number
- Policy Number
- The phone number of the agent on record
- Death benefit amount
- The names of any other beneficiaries you may have. All of the beneficiaries need to be part of the death claim in order for the company to pay the benefits.
Another thing to consider is the tax code of the country he or she lives
Typically, life insurance proceeds are tax-free in the US. However, this may not be the case for the country where your beneficiary lives. Please consult an international tax attorney to determine if there are going to be any tax consequences for them. The last thing you want is for your beneficiary to have to worry about any tax problems.
Review the policy often
The last advice we will give you is to review the information on your life insurance on a regular basis. Life changes and you want to make sure the policy is up to date and that the coverage amount is still adequate.
A good life insurance agent will call you for a policy review every couple of years, if not every year. You may have a case where the beneficiary changes their name. In this case, you need to update that section of your policy to avoid any complications later.
Please keep in mind that we are here to answer any additional questions you may have. You can reach us via e-mail or by phone. We are looking forward to working with you in getting the peace of mind that your family is protected!