When you apply for life insurance, the insurer 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.
Unlike homeowners and auto insurance, your location within the U.S. does not impact your life insurance premiums.
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.
Key takeaways
You won’t see higher or lower premiums due to geographic location within the U.S.
Life insurance companies are regulated by local legislative bodies; each state may have different rules for the free look period, late payments, and life insurance insolvency.
States may also have laws that restrict who you can name as your policy’s beneficiary.
Not every type of policy is available in every state.
Can your geographic location affect your life insurance premiums?
While life insurance companies take mortality risks such as your medical history or a dangerous occupation into account when determining your life insurance premiums, the residential risk of life insurance isn’t a primary determining factor.
You won’t be charged more if you live in a state prone to natural disasters or other risk factors. However, although your geographic location won’t earn you a higher risk classification or higher premiums, each state has its own legislature that impacts your policy.
How does local legislation impact 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’re working with about the following specifics that vary state by state:
Free look period: This is the period when policyholders can back out of their policy and receive a refund for their initial premium payment.
Late payment grace period: This is a window of time you have to make up a late premium payment before your policy is legally terminated.
State guaranty: These state organizations 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). The organization offers an online tool where you can find your state’s guaranty association.
→ Learn more about your state’s insurance regulations
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Can you purchase 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 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 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. [1]
But even lawful travel can impact your risk classification and eligibility for a life insurance policy, whether it’s for business or leisure.
Depending on the length, frequency, and destination of travel, it’s possible to get a higher risk classification, 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:
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 risk classification or eligibility:
Connecticut
Colorado
Maryland
Massachusetts
Oklahoma
Washington
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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 of majority — the age someone’s considered 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 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.
If your dependents aren’t yet at the age of majority in your state, they can't legally receive the death benefit. 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 majority is 18. In Alabama and Nebraska, it’s 19, and in Mississippi, it’s 21.
What to do if your child isn’t the age of the majority
If you’d 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. A trust allows you to dictate how any money is spent, when, and how much.
If you know that you’d like some of the death benefit to go toward 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.
This means they’re considered jointly owned with your spouse. Because life insurance is a form of income replacement, it’s also subject to community property laws.
There are nine community property states and three states that let married couples opt into 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. [2]
Community property states:
Arizona
California*
Idaho
Louisiana
Nevada*
New Mexico
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, talk to your life insurance broker about local laws and regulations to make sure you fully understand how your policy works.
Frequently asked questions
Do life insurance rates vary by state?
No. Life insurance companies don’t use your location to determine policy rates.
What factors affect the cost of life insurance?
Life insurance companies factor in your age, health, gender, family medical history, and lifestyle factors to determine your risk classification and rates. Your policy will cost more depending on the type of policy, amount of life insurance, and if you opt for any policy additions (riders).
Can you buy life insurance in a different state?
You can buy life insurance in any state you’d like, but you’ll abide by the insurance regulations of the state where you apply and sign your paperwork.
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