Foreign Nationals, who spend considerable time in the United States, old assets or maintain significant ties to the United States may have a need for U.S. life insurance. Asset preservation, transfer of wealth, state/tax planning and family income protection are just some of the common financial objectives that apply to individuals and families, regardless of residence. This Foreign National Life Insurance Guide will help you understand you U.S. life insurance options.
Immigrant Life Insurance has years of experience in the international insurance market. We have relationships with many of the largest and most respected companies in the industry. This allows us to offer high-quality life insurance products suitable for the unique financial needs of foreign nationals.
International underwriting guidelines are becoming more flexibility and market specific; some companies now consider foreign prospects for the best underwriting rates. Each insurance company has its own set of underwriting guidelines in place to determine whether a proposed insured may be eligible for coverage.
What is a Foreign National?
A foreign national is defined as a citizen of a country other than the United States, not meeting the United States qualifications for permanent residency.
How to Qualify for U.S. Life Insurance
Foreign nationals seeking U.S. life insurance must be someone who:
- Has a valid U.S. visa
- Resides outside the U.S. for the majority of the year; more than six months (183 days)
- Has meaningful connections/ties to the U.S.
- Has a worldwide minimum net worth above specified levels.
These are the initial qualifying parameters that insurance companies use to determine a foreign national eligible for coverage. Another important factor is the country of residence. Coverage may not be available for individuals residing or traveling to certain countries.
Establishing a U.S. connection
In order to justify the need for insurance within the United States, non-U.S. citizens/residents must show and maintain both physical and financial connections to the U.S.
This is done in a variety of ways:
- Existing U.S. bank or savings account
- U.S. assets generally equal to 20% of the total coverage applied for
- Maintain a secondary residence in the United States
- Have total or partial ownership in a U.S. company or business.
- Employed by a U.S. company or business
- Travel to the U.S., generally between 30-45 days per year minimum.
- Have immediate or close family relation with permanent legal status residing in the U.S.
- Have some type of U.S. tax liability
The stronger and more meaningful the presence/connection to the United States, will facilitate the underwriting of the application and help obtain better rates. In the cases where the policy owner is different from the insured, all above guidelines will also apply.
Who is considered a Foreign National?
For the purposes of life insurance, insurance companies generally define a foreign national as a person who is not a U.S. citizen or considered a permanent resident of the United States.
International underwriting guidelines also apply to U.S. citizen/residents with frequent or long-term travel outside the United States. Any individual residing outside the United States for more than six months (183 days) out of the year generally is considered as a foreign resident for underwriting purposes.
The Application Process: General Guidelines
Most U.S. insurance companies are not licensed or authorized to sell in foreign jurisdictions. Each country has its own laws and regulations on what is permissible activity regarding the sale of insurance products.
The solicitation of all U.S. life insurance applications must take place in the United States, regardless of the country of residence. Solicitation includes all aspects of the sale process from the presentation of the illustration, application, to the completion of underwriting requirements including any examinations and the delivery of the policy. In addition, the policy premium must be paid for from a U.S. bank account.
As part of the application process, the proposed insured will take a medical exam that with few exceptions must be conducted in the United States by a life insurance company approved laboratory or examiner.
Insurance companies have country specific underwriting guidelines, which consider factors such geographic region, U.S. relations, economic stability, and political climate.
Coverage limits and underwriting rates are impacted by the classification assigned to the proposed insured’s country of residence. Or in the cases of U.S. citizens/residents with long-term foreign residency, country classification will apply to those countries of travel.
SOLICITATION OF APPLICATION — UNDERWRITING REQUIREMENTS — DELIVERY OF THE POLICY
- All application forms/illustrations must be signed in the U.S.
- Any additional underwriting requirements must be completed in the U.S.
- All medical exams unless approved by the underwriter must be done in the U.S.
- The policy must be delivered and all delivery requirements signed for in the U.S.
- Premiums must be paid using U.S. funds (U.S. bank account)
- Life Insurance Eligibility Criteria for Foreign Nationals
Policy owners should consult with their legal advisors to ensure compliance with in-country requirements.
Most insurance companies will allow direct Non-U.S ownership, meaning the policy owner and insured can be the same. However, each insurance company has its specific guideline regarding the ownership arrangement for foreign nationals depending on country of residence.
Possible ownership arrangements include:
- Non-U.S. citizen/resident policy owner
- Non-U.S. entity such as a corporation or trust
In the cases where Non-U.S. ownership is not permitted, a U.S. entity such as trust can be used.
In contrast to a U.S. citizens/residents, foreign nationals considered nonresident aliens can own a life insurance policy without being subject to U.S. income or estate taxes. However, certain other ownership arrangements such as a U.S. entity policy owner can trigger tax planning issues.
Life Insurance as a Planning Tool
Here are some of the ways life insurance can provide solutions:
- Family Protection/Income Replacement. Life insurance can provide or replace income lost from the death of a wage earner, allowing family and dependents continued standard of living.
- Supplement Retirement Income. Life insurance offers not only an income tax-free death benefit to beneficiary(s) but also tax deferred cash value growth. This cash value can be taken out and used as part of a retirement plan.
- College Planning. College and university tuition continues to rise, life insurance can protect and provide the means to cover future education costs.
- Real Estate/Mortgage Protection. Cover the unpaid or remainder balance of your home mortgage or real estate loan. Typically, enough insurance is purchased to pay off the principal amount of the loans and not any future interest.
- Estate Planning/Final Expenses. Estate planning concerns are a big reason for coverage, life insurance proceeds are income tax-free in the U.S. and can provide the liquidity to pay estate taxes and final expenses.
- Children with disabilities. The death benefit can be used to fund a trust that will provide for a child with disabilities after the death of the second parent or guardian.
- Business Continuation. Life insurance is not only a personal planning tool. It can be a valuable tool for business as well. Protect an important or key person in the company or ensure a smooth transfer of ownership upon an owner/shareholder’s death, disability, or retirement with a buy-sell agreement funded with life insurance.
- Key man insurance. A business is only as good as the people it has. A loss of a key person or employee can be devastating to the continued success of a company. A life insurance policy insuring these skilled and crucial individuals can help safeguard a business’s operating and economic security.
Why Purchase U.S. Life Insurance
Many foreign nationals purchase millions in U.S. life every year and the number continues to grow annually. The United States is still considered as one of, if not the most stable country to hold and accumulate assets. This is why it is not uncommon for high net worth individuals or across the globe to have bank relations, businesses, and residences in the United States.
Top Rated Life Insurance Carriers
U.S. insurance companies are some of the largest and most financially solvent corporations in the world. U.S. carriers offer a broad range of financial products and services that may not be available in another country. U.S. life insurance products are generally more competitive since pricing/rates are based on U.S. mortality assumptions.
Confidentiality Outside Home Country
One major reason foreign nationals purchase U.S. life insurance is for privacy. Many foreign nationals living in high risk or unstable countries (Latin America) do not like disclosing personal and confidential financial information to local agents due to risk of kidnapping & extortion. Dealing with a U.S. life insurance agent and company eliminates the need for such disclosure.
Political and Economic Stability
The United States is an attractive option for foreign nationals because of its political and economic stability. Partly the reason, many wealthy foreign nationals from Latin America look to the U.S. for long-term preservation of assets.
U.S. life insurance policy dominated in U.S. dollars can help conserve assets for future generations.
Financial and Legal System
U.S. financial system through its institutions and laws offers an abundance of wealth building, investment, and retirement options. The ability for foreign nationals to directly own a U.S. life insurance policy gives them the flexibility to use policy values to fit a specific objective.
Access to Experienced International Underwriters and Priority Handling of Your Case!
Our years of knowledge and experience in the foreign national markets has allowed us to gain the confidence of every single insurance company we work with. All foreign national business is submitted to and underwritten by the most trained and practiced underwriters.
Life applications are handled by dedicated international Underwriting teams experienced in assessing the global financial and medical data, the residency risks involved and the personal/business travel habits inherent to each individual.
This guide is meant to be used as a general reference to the standard procedures and requirements applicable to all phases of the application process. If you have any questions regarding these guidelines, please contact our office.
For more information regarding foreign national life insurance. Please contact us, we have extensive experience in the foreign and international insurance markets. We can answer questions and discuss policy options with you at no obligation.
Immigrant Life Insurance and its representatives do not provide any tax or legal advice. This guide is for informational purposes only. Before making any decision, you should consult with a licensed tax or legal professional to determine the suitability of a particular financial transaction and discuss the tax and legal implications.