Does where you live affect your life insurance policy?

When you apply for life insurance, the life insurance company measures the risk of insuring you. It considers a number of factors that are out of your control – such as your family history, age, and gender – to determine what policies are available to you and how much you’ll pay. So do they also consider where you live?

Unlike homeowners and auto insurance, your location within the U.S. does not impact the premium you pay for life insurance.

But because the life insurance industry is regulated by state legislature, a policy in New York might work differently than a policy in Utah. Each state has its own rules about refunds for new life insurance policies, grace periods for late payments, and protections for policyholders and beneficiaries if a life insurance company goes bankrupt. State laws can also impact who qualifies to receive a life insurance death benefit.

Can your geographic location affect your life insurance premiums?

Each state has its own sets of hazards and risks. Coastal states are prone to the consequences of climate change, such as an uptick in hurricanes and wildfires, while inland states like Ohio are at high risk of devastating tornadoes. But while life insurance companies take mortality risks such as your medical history or any dangerous hobbies into account when determining your life insurance premiums, they aren’t going to charge you more if you live in a state prone to natural disasters or other risks to mortality, such as above-average obesity rates.

Though your geographic location won’t earn you a lower health classification and higher premiums, each state has its own local legislature that impacts your policy.

How local legislation impacts your policy

State legislation is the primary governing body for life insurance policies and protections for policyholders. When you’re going through the life insurance application, you should ask the insurance broker or agent you are working with about the following specifics that vary state by state:

• 1. Free look period — the period of time where policyholders can back out of their policy and receive a refund for their initial premium payment

• 2. Late payment grace period — the period of time you have to make up a late premium payment before your policy is legally terminated

• 3. State guaranty — state organizations that ensure continued coverage and a death benefit payout if your life insurance company is declared insolvent or bankrupt

State associations work together through an organization called the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). You can find your state’s guaranty association on their website. 

→ Learn more about your state’s insurance regulations

Purchasing life insurance abroad

If you’re an American expat who lives abroad part-time or full-time, or otherwise cannot prove residency, your options for purchasing life insurance with U.S. company are limited.

Most insurance companies require you to complete the application and medical exam, as well as sign your final policy, in the U.S. But some insurers will cover you, especially if you split your time between the states and another country, or if you have a high global net worth.

Laws about travel

Unlawful travel will disqualify you from purchasing life insurance regardless of where you live. Interstate or foreign travel is classified as unlawful if you distribute the proceeds from any illegal activity, commit a crime or act of violence, or promote any illegal activity, according to the International Travel Act of 1961. 

But even lawful travel can impact your health classification and eligibility for a life insurance policy, whether it’s for business or leisure. Depending on the length, frequency, and destination, it’s possible to get a lower classification — which leads to higher premiums — or be disqualified from purchasing a life insurance policy altogether.

Some states have legislation in place that prohibits life insurance companies from using any planned lawful travel to determine your life insurance policy. These states are:

• Florida

• Georgia

Life insurance companies also look at your travel history as an indicator of future behavior. The following states have legislation in place that prohibits life insurance companies from using past lawful travel as a factor in your life insurance health classification or eligibility:

• California

• Connecticut

• Colorado

• Illinois

• Maryland

• Massachusetts

• New York

• Oklahoma

• Washington

Laws about beneficiaries

Where you live can affect who you list as your beneficiaries and how they can receive the death benefit. This is due to the age that is deemed a legal adult in certain states and community property laws.

Age of the majority

When you’re naming your life insurance beneficiaries, either primary or contingent, you may be considering naming your child as your life insurance beneficiary. Though you’re likely putting a life insurance policy in place for their protection, naming your children as your life insurance beneficiary isn’t always a good idea. That’s because if your dependents aren’t yet at the age of the majority in your state, they may not be able to legally receive the death benefit. If you die and your child isn’t at the age of the majority, the funds could get tied up in court and they might not get to access the death benefit when they really need it.

In most states, the age of the majority is 18, but three states designate legal adulthood differently. Those states are:

• Alabama - Age of majority: 19

• Nebraska - Age of majority: 19

• Mississippi - Age of majority: 21

What to do if your child isn’t the age of the majority

If you would like to leave your life insurance death benefit to your minor child as opposed to a spouse, you can put the death benefit into a trust to ensure that the payout doesn’t get tied up in court for years.

To do this, you’ll need to assign a custodian that you trust to disperse the funds in accordance with your wishes when the death benefit is paid out. Your policy’s custodian will own the account until your child reaches the age of the majority and can use money from the account for eligible expenses, which vary depending on state law. If you don’t specify a custodian, again, the courts will choose for you. They will usually pick the surviving spouse if they are still alive.

If you know that you’d like some of the death benefit to go towards a college education, you can designate some of the money to a 529 plan, legally known as a qualified tuition plan, which can be withdrawn from tax-free for higher education expenses.

State community property laws

Some states have community property laws in place, which deem all your assets and income as community property. If you live in a state with community property laws, your assets are considered by the state to be jointly owned with your spouse. Because life insurance is an income replacement, it’s also subject to community property laws.

There are nine community property states and three states that let married couples opt-in to community property. Puerto Rico and Guam also have community property laws. The rest of the states do not have community property and use common law instead.

Community property states:

• Arizona

• California*

• Idaho

• Louisiana

• Nevada*

• New Mexico

• Texas

• Washington*

• Wisconsin

*Community property law generally extends to people in a registered domestic partnership in these states.

Opt-in community property states:

• Alaska

• Tennessee

• South Dakota

If you’re purchasing a life insurance policy and reside in a state with community property laws, you have to name your spouse as your life insurance beneficiary unless they sign a legal waiver that permits you to list someone else.

Before you purchase a life insurance policy, you should talk to your life insurance broker about local laws and regulations to make sure you fully understand how your policy works.