Life insurance for non-US residents
How to get life insurance as an American expatriate or non-citizen living outside the US, and what happens to your coverage if you move abroad.
Life insurance can play an essential role in protecting and building family finances, but when you live abroad, the process of purchasing or maintaining coverage gets more complicated. Citizens and permanent US residents have an enormous variety of options at competitive rates. However, for non-residents, several added rules, regulations, and practicalities need to be considered. This article can help by addressing how life insurance works for people in a few specific situations, including:
1. You have an existing life insurance policy in the US, then move abroad
If you're planning to move abroad, the first thing to do is 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. Why? Insurance companies consider some foreign countries to be riskier places to live due to limited healthcare access, disease prevalence, political instability, or other factors. And generally speaking, term life insurance policies are more "portable" partly because they don't have a cash value component that may be treated differently in various jurisdictions. Here are some specific things to consider:
Read your policy terms: Different insurers have different rules about international residency. Some will maintain your coverage; others may only offer reduced benefits or even cancel your policy. On the other hand, some policies have international riders that specifically cater to expatriates. Whatever the specific terms of your coverage, they will be spelled out in your policy contract.
Check for exclusions: Some policies may allow policyholders to move overseas but have country-specific exclusions, especially if you're moving to a country with high health or safety risks, or a region considered to be high-risk by the US government.
Think about currency exchange and premium payment: Be mindful of fluctuating exchange rates, as they can impact your premium payments -- especially if you're earning income in a different currency. And when transferring funds from one country to another, make sure to account for processing time to avoid late premium payments.
Look into local regulations: Local regulations in your new country of residence may affect your ability to maintain a U.S. policy. For example, some countries have restrictions on holding financial products, including insurance, from foreign companies.
Look at the tax implications: There may be tax liabilities related to your coverage, especially if it’s cash value life insurance (i.e., a permanent whole or universal policy)1. [AA1] And while death benefits in the US are almost always paid out income tax-free, that may not be true in the country you reside in: your death benefits could be subject to local estate or inheritance taxes. Understanding this will help you better plan for your beneficiaries.
2. You’re an American expatriate who wants new coverage
If you're already living abroad and are interested in taking out a new policy, you'll need to do some research and can expect to find a limited range of options, as not all US-based life insurance companies offer policies to expatriates. However, some companies offer policies with optional "expatriate riders" that are specifically designed for American citizens living abroad and may even provide advantages like currency exchange protection or repatriation benefits. But it's important to note that even an expatriate policy may come with certain travel restrictions. For example, if you need to work or travel to regions that the US government considers high-risk, you may be denied coverage or face higher premiums. A few other things to consider:
Medical exams: Companies often require a medical examination before issuing coverage, which can be problematic if you live in a remote area. Also, not all insurers accept medical records from foreign doctors; if yours accepts foreign medical records, you should expect to have to pay for certified translation.
A complex application process: Be prepared for a lengthy and rigorous underwriting process. This might include a deep dive into your medical history, financial records, and lifestyle choices (such as alcohol and tobacco use, and risky hobbies, like scuba diving). Some insurers may require you to be physically present in the US at certain points in the application process, for example, at signing or for a medical exam.
US address requirement: Even if you no longer reside in the US, some insurers will require a US mailing address in order to qualify for coverage. The home of a relative or legal representative's office can usually help you fulfill this requirement.
3. Getting coverage as a non-US citizen on a temporary visa
While you may currently live in the US with an E, K, H1B or other visa, as a non-citizen with temporary resident status, your primary residency is officially in another country. You may be able to obtain coverage, but the process will generally require extensive documentation and your choices will vary depending on your visa type, duration, and the guidelines of the life insurance company issuing the policy. Some insurers may also require that a US citizen – such as a relative or employer – sponsor your application. Other things to be aware of include:
Proof of residency and visa status: Insurers will likely require proof of US residency, so it's essential to ensure that your visa is current and valid when applying for life insurance. They may also ask for evidence of income, employment, and other ties.
Limited coverage: Coverage might be restricted to the duration of your visa, so if you decide to move abroad later on, your policy may be canceled.
High Premiums: Rates are often higher for non-citizens due to higher perceived risk.
4. You are a non-resident, non-citizen with significant US ties
Some high-net worth foreign nationals with significant business, financial, and family ties may also qualify for coverage from a US-based life insurance company. These policies are typically quite specialized and designed to help internationals with personal and business interests in different countries manage their complex affairs. Some considerations to keep in mind include:
Insurability interview: Be prepared for an extensive interview to determine insurability, including questions about your ties to the US. You may also be required to complete the application process on US soil.
Limited policy choices: There are fewer policy options available, and premiums are typically higher due to perceived risk and underwriting complexity.
Proof of US and global assets: Requirements vary, but expect to be required to verify significant global assets – and a substantial portion of those assets in the US.
Despite such limitations, these policies can be an invaluable tool for internationals looking to the US as protection for family capital and assets. In addition to diversifying their financial portfolio, such policies can help solve the problem of transferring wealth to the next generation: While US residents enjoy a federal estate tax exemption of $12,940,000, the exemption for non-residents is limited to just $60,000. Non-resident life insurance can help bridge this disparity because death benefit payments are exempt from federal estate taxes.
The Global Citizens Program
Guardian provides specialized life insurance solutions and services designed to meet the unique demands of high-net-worth international clients. Our Global Citizens Program allows qualifying clients to tap into a dedicated team that specializes in the more complex financial protection needs of clients with multinational interests – and provides white-glove service with the backing of one of the world's largest mutual life insurance companies. Clients must be non-resident, non-US citizens who demonstrate financial connections, holdings and/or family ties in the US. A dedicated case concierge team is assigned to help each applicant, and submissions are evaluated by specialized underwriters. Other amenities include a complimentary US trust review, translation services, law firm referrals, and more. To learn more, contact a Guardian financial professional.
5. You are a beneficiary of a policyholder that lives – and passes away — abroad
If a policyholder dies while living abroad, the process for claiming life insurance death benefits is conceptually the same as in the US: once proof of death is provided to the insurance company, each beneficiary is paid their share of the death benefit. However, there tend to be added complications that policyholders and beneficiaries should be aware of – especially for a beneficiary who also lives abroad:
Documentation: Most US states require life insurers to regularly review the Social Security Administration (SSA) Death Master File to see if any of their policyholders have passed away. However, global life insurance works differently, and the SSA doesn't always have recent data on Americans who pass away abroad. So, additional paperwork tends to be required to certify death internationally. Specialized documents such as international death certificates, consulate reports, and notarized/certified translations of foreign documents will likely be required. This tends to slow down the payout process, requiring extra effort to claim benefits.
Currency conversion: With very few exceptions, the death benefit in a US life insurance policy is paid in US Dollars. This shouldn't be an issue for beneficiaries in the US, but it can be for those who live abroad: any currency conversion and international transfer fees will detract from the death benefit received.
Legal and tax implications: While death benefits are almost always paid out free of income taxes in the US, there may be foreign tax obligations for beneficiaries who live abroad. Also, international law as it pertains to estate and inheritance can be quite complex and difficult to navigate, so when purchasing life insurance to protect the finances of beneficiaries who live abroad, consider seeking appropriate legal representation to ensure their needs are met.
This article is for informational purposes only. Guardian may not offer all products discussed. Please consult with a financial professional to understand what life insurance products are available for sale.
1 Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The information provided is based on our general understanding of the subject matter discussed and is for informational purposes only.
2 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.
3 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.