For insurance underwriting purposes, foreign nationals/non-U.S. residents are generally defined as:

  • Foreign citizens currently living or planning to live in the U.S.
  • Foreign citizens residing in the U.S. on a part-time basis only
  • Foreign citizens residing in the U.S. on a temporary basis for education and/or business needs
  • US citizens that spend more than 3 months outside of the U.S., some carriers consider anything over 6 months

A foreign national may seek life insurance coverage in the U.S. for one of several reasons:

  • Owning U.S. based assets (businesses or stock) that may be subject to estate tax
  • Planning to transfer or accept U.S. based assets
  • Planning to live part-time or permanently within the U.S.
  • Financial planning for foreign national estate and gift taxation

Life Insurance

Life insurance is not considered a U.S. based asset for tax purposes (estate/gift). As a result, Life insurance provides significant tax shelter, asset security, and death benefits to foreign nationals. The death benefit under a life policy is usually free from income tax. Whole life policies offer cash value accumulation on a tax-deferred basis and can allow for income tax-free withdrawals and loans. By utilizing life insurance in their estate planning, foreign nationals may be able to provide tax-free benefits to their dependents via the death benefit to cover U.S. estate taxes without having to sell off assets, allowing for wealth transfer once liabilities are met. In addition, the death benefit can provide for other tax liabilities and personal debts. Without life insurance, your U.S. based assets may be subject to significant estate taxes that may force your dependents to sell them to cover the tax burden. As information regarding estate taxes has become more well known, the demand for life insurance continues to increase.

Demand

Sharp increases in foreign national life insurance applications are being seen throughout the life insurance industry. This increased demand has translated into significant investment in the life insurance carrier space to develop better life products and smoother underwriting processes. Underwriting guidelines within the foreign national space have often been regarded as too rigid. Lately, increased flexibility and quick turn around times are becoming the new normal. Each insurance company offers a unique set of underwriting guidelines that stipulate minimum and maximum insurance amounts, types of products available and financial thresholds. Insurance companies consider many factors in deciding to offer coverage, but the first consideration for foreign nationals is a connection to the United States.

Qualifying through a U.S. connection

In order to qualify for life insurance in the U.S.  as a foreign national, you must have a valid connection. The insurance carrier will verify the connection and apply underwriting guidelines. Types of Connection include:

  1. U.S. residency or secondary residence
  1. Employment within the U.S.
  1. Travel to the U.S. meeting certain minimum time requirements
  1. Assets in U.S. banks
  1. U.S. tax liabilities

Other Life Insurance Benefits:

  • Peace of mind that your dependents are financially covered by the death benefit
  • Cash accumulation in whole life policies that can complement your retirement strategy
  • Tax-free loans available from the policy cash value on a whole life policy
  • Tax-free death benefit to cover estate taxes and personal debts
  • Collateral for business loans or personal projects. The policy would be collaterally assigned to cover only the outstanding debt and the remaining death benefit would be provided to your listed beneficiaries.
  • Family protection/income replacement, estate planning, college planning, retirement income, business coverage

Underwriting/Approval

Foreign nationals are required to complete the life application, medical exam (if required) and delivery of the policy within the U.S. These portions can be completed relatively quickly and are often done while on business trips. Certain companies may allow for a designated POA (power of attorney) to accept delivery/sign on your behalf. This is necessary as most U.S. insurance companies are not authorized or properly licensed to provide insurance in foreign countries. To create a more straightforward approach and abide by insurance regulations, all solicitation must take place with the U.S.

For risk assessment, the underwriter will generally request and review the following:

  • Financial details including income, assets, and net worth to determine if the requested coverage amount (death benefit) is appropriate. The financial underwriting involves reviewing your total insurance picture including current in-force life insurance policies with other insurers, both foreign and domestic. Many insurance carriers use estate calculators to forecast future growth and determine maximum insurance amounts you may qualify for.
  • Medical records may be required depending on the requested face amount, usually needed on face amounts >1,000,000. Medical records are manually reviewed by an assigned underwriter and receipt can sometimes be delayed. The need for records is determined by your medical impairments and the face amount of the application. Common impairments that require medical records include cancer, diabetes with complications, coronary artery disease, cerebrovascular disorders and other impairments with increased mortality.
  • Travel details will be requested to protect against travel to areas prohibited by the U.S. Some prohibited countries may include North Korea, Afghanistan, Egypt, Iran, Iraq and other countries that include safety concerns. If the travel is temporary/one-time, the carrier may offer upon your safe return and subject to your attestation of not returning within a two-year timeframe. Carriers generally consult the travel lists created/monitored by the U.S. Department of State. While many carriers will decline you for “dangerous” travel, some may opt to charge you an increased death benefit in the form of a flat extra. A flat extra is simply a premium charge applied for each unit of coverage you request; a common example would be an insurance carrier charging someone an extra $3.00 per every $1,000 of the face amount (death benefit).
  • Visa or Green Card (Permanent Resident) copy will be required and reviewed as part of the underwriting process. Some visas may not be eligible but most will. We recommend you consult with our experts during the application process.

Insurance types available

Term life insurance: Straightforward life coverage with fixed premiums over yearly increments of 10, 15, 20 or 30-year terms. Term life insurance will be the most affordable option and allows for face amounts from as little as 50,000 to amounts in excess of 5,000,000.  Keep in mind that not all U.S. insurance carriers offer term coverage to foreign nationals. SimpleLife will help you choose the best carrier for your insurance needs.

With term coverage, you’ll pay lower premiums and have a guaranteed death benefit for the term length.

Permanent life insurance: Permanent insurance with fixed premiums that accumulate cash value.

Permanent life insurance types:

Traditional: provides insurance coverage for the contract holder’s entire life with a guaranteed death benefit

Variable: permanent insurance with a guaranteed death benefit and investment options without a guaranteed cash value and level premiums

Universal: permanent insurance with a guaranteed death benefit and a cash value protected from unusual market risks with variable premium options

While more expensive than term, a whole life policy will provide you a guaranteed death benefit for life. Term and/or whole life insurance are great options for your estate planning. You may find that a combination of these options suits you best.

As is the case with any insurance policy, insurable interest must exist between the insured and the policy owner. Insurable interest is required to ensure that mutual financial interest exists in the continued life of the individual insured.

Getting a quote

SimpleLife is here to help you choose the best insurance carrier and product to meet your needs. Choosing the correct insurance company is often as important as the life product itself. If you’re a foreign national looking to protect your estate with life insurance, let the experts at SimpleLife help you acquire the best plan at the best possible price!

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