Traveling and moving abroad can be exciting, but doesn’t eliminate your need for life insurance. Expats living abroad permanently definitely need financial protection.
Below we’ll explore different life insurance options for U.S. and non-U.S. residents who live or travel abroad. We’ll also cover what beneficiaries should do about the death benefit if the insured person lived outside the States but had a U.S. life insurance policy.
What happens to your life insurance policy if you move abroad?
Where you live when you originally buy your life insurance is a key factor if you hold — or want to buy — insurance from an American company.
If you already have life insurance in the U.S.
Your existing life insurance policy won’t be affected by an international address change. If your policy doesn’t have any international travel exclusions (most term life and whole life insurance policies don’t) then your beneficiaries will receive a death benefit no matter where you live.
If you want to buy life insurance from a U.S. insurer
For expats who don’t have an existing U.S. life insurance policy, buying a new policy once you’ve relocated is complicated. Only a few American insurers will cover you.
Some companies are comfortable with clients who split their residency between the U.S. and abroad, but the application (insurers can track the IP address location where you apply) and paramedical exam both need to take place in the U.S.
Additionally, the final policy will have to be physically signed in America. Even if you sign the policy electronically, the city and state can be automatically populated by the insurer.
Here are the steps you’ll need to take.
How expats can buy a new life insurance policy abroad
The steps to securing a life insurance policy abroad are similar to buying a policy if you live in the U.S. But, as already noted, finding an insurance company that will work with you is the biggest roadblock.
That’s because insurance companies are all about assessing risk, and they view living outside the country as riskier than staying local.
Additionally, even if you can get a policy while living internationally, you’ll most likely need to come back to the States to complete your application and medical exam, and to sign your final policy.
1. Calculate how much life insurance you need
The amount of life insurance you need depends on a few factors:
How much you make (a coverage amount that’s 10 to 15 times your income is a good place to start)
Outstanding debts and financial obligations (such as a mortgage or student loans)
How long you’ll have financial dependents
2. Decide which type of policy you need
Most people choose between a term or a permanent life insurance policy.
Term life insurance is the right choice for most people because it’s cheaper, only lasts for a set term, and comes with few regulations and tax restrictions.
Whole life insurance, on the other hand, can be better for people with long-term dependents or looking to diversify their investment portfolio.
3. Collect the documents for your application
This is where things can get complicated for international residents.
Insurance companies typically require the following documents when you apply for a policy:
Proof of identity, citizenship, and age
Proof of income
Proof of residency
Social Security number or tax identification number
Expats won’t be able to provide proof of U.S. residency unless they have split residency. Citizens living permanently outside of the country may be able to proceed with the application by working with insurance companies that offer international coverage.
We recommend involving a licensed independent agent or broker at this point to ensure you’re applying for the right types of policies with companies that are likely to offer you insurance.
At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.
4. Shop for a life insurance policy
Your options are much more limited if you’re living abroad partially, temporarily, or permanently. But because every life insurance company evaluates each application on an individual basis, you’ll pay the most affordable premiums by shopping around with multiple insurers as opposed to working with just one.
5. Complete the application and phone interview
If you’ve found a company that will work with your residency status, the next step is to actually apply and complete a phone interview. Even insurance companies that allow outside residency will require both of these steps to be completed in the U.S.
6. Get a medical exam
Similar to the application, insurance companies will typically require the paramedical exam to be completed on U.S. soil.
There are no-medical-exam life insurance policies available to applicants of certain ages and who meet specific health qualifications. Unfortunately, lack of U.S. residency can be an automatic disqualifier and will likely exclude you from getting these types of policies.
7. Wait for the underwriting results
Underwriting is when the life insurance company evaluates the risk of insuring you and determines how much your premiums will be based on that risk.
The underwriter will evaluate your application and interview answers, medical exam, medical history, and other records (such as a motor vehicle report).
This process can take four to six weeks, but sometimes longer if they need to verify parts of your application or require any supplemental documentation.
The most common life insurance health classifications, in order from the highest health rating to lowest, are:
People with complicated health histories or recent medical issues may be given a substandard rating, which is assessed via a table rating system.
8. Sign the documents and pay for your policy
The last step, once you’ve been approved for a policy is to sign it in force. This also needs to happen in the U.S.
If you die abroad, do your beneficiaries get the death benefit?
If you die while you’re living abroad, your specific policy will dictate how your beneficiaries can claim the death benefit. Some policies have travel exclusions or certain country exclusions based on how risky they are in the eyes of the insurer. This is obviously one more item to check before you choose a policy.
Life insurance companies typically require three items to process an insurance claim:
A death certificate
A completed claim form
For international death benefit claims, the insurance company may require some extra documentation, including a W-8BEN.
Your beneficiaries will typically need a U.S. bank account to claim the death benefit from a U.S.-based insurance company.
It may be helpful for beneficiaries to contact the U.S. Embassy in the country where the insured died or a lawyer who specializes in international insurance to assist them with a foreign death claim.
It’s worth discussing these issues with your beneficiaries if you live outside the U.S. but have a policy from an American company.