Life insurance can be a very useful tool in terms of transferring risk and estate planning. It may also be beneficial under some limited circumstances as an investment vehicle which I covered in two previous blog posts here. However, if you are not a U.S. citizen, you may wonder if you can still buy life insurance in the U.S.? Does your immigration status affect the pricing? When is the best time to buy it? If you have the same questions in your mind, you may get some general guidance from this post.
When it comes to the underwriting of a life insurance policy, every insurance company will consider how much time the insured will spend outside the U.S. now and in the future beside other factors such as his/her age, current health condition, financial situation and so on. Why? The pricing of a life insurance policy is mainly based on the life expectancy of the insured. The life expectancy of an individual can be affected by the conditions of the countries you live in which including but not limited to the economic and political conditions, standards of public health and sanitation, cultural attitudes toward personal health and safety. U.S. citizens living abroad or traveling a lot are also subject to some special underwriting guidelines when they buy U.S. life insurance.
Firstly, let's talk about the "Approved Countries List". Every insurance company has a list of countries that they will accept applications when the insured is defined as a foreign resident of that country. The definition of the foreign resident may vary among insurance companies. But in general, you will be treated as a foreign resident if (1) you spend more than 2-3 months a year outside the U.S., or (2) you reside in the U.S. on a temporary basis including people who hold non-immigrant visas and do not have the intent to stay here permanently, or (3) you have been in the U.S. for less than one year but have the intention to stay longer. Each country on that list has also been assigned a letter rating, usually from A-C or even D, to indicate the risk class of that place from the life expectancy perspective. The rating will dictate what types of policies are available to you, what the minimum and maximum death benefit policy you can have, and more importantly what the best health class rating you could get. If you are treated as a foreign resident in "A" or "B" countries, you probably could still get most types of policies with some generous limitations on the amount of death benefit. The biggest advantage for "A" countries is the best health class rating (better health rating class usually means cheaper premium). Usually, that rating is only available to foreign residents in "A" countries but not in countries rated "B" or below. Foreign residents in "C" and "D" countries are usually subject to much stricter underwriting guidelines regarding the products availability, death benefit limitations, and health rating class restrictions.
The list and rating are similar but not exactly the same among insurance companies. You could look at the attached list from one insurance company here to gain some basic ideas of the ratings on each country. I intentionally take out the name of the insurance company because I don't want to promote any specific insurance company here. As always, I want to be as independent and objective as possible. Since most of my readers are related to China one way or another, you could tell from this list that Hong Kong and Taiwan are rated "A", big cities in Mainland China are rated "B", and rural areas in Mainland China are generally rated "C".
With all the above-mentioned information, I am ready to answer the questions more clearly one by one.
1. Can you buy life insurance here as a Non-U.S. citizen?
In general, the answer is yes unless you are treated as foreign residents in "C" or "D" countries by the insurance company, or you don't have any personal or business connections to the U.S. at all.
2. Does the immigration status affect the pricing?
Yes, it does. Your immigration status is usually a good indication of your connections to the U.S. It helps insurance companies decide whether you should be treated as a foreign resident which would be potentially subject to some unfavorable underwriting guidelines mentioned above. Permanent residents/green card holders are usually considered as U.S. residents unless you travel outside the U.S. for more than 2-3 months in a year. People with valid non-immigrant visas like H1B, L1, etc. are usually treated as foreign residents. However, if you have lived in the U.S. for more than 10 months per year in 3 consecutive years, either own real estate or a business in the U.S., or married to a U.S. citizen, insurance companies generally will believe that you have the intention to stay here permanently and treat you as a U.S. resident or at least give you some exceptions to their limitations on foreign residents.
3. When is the best time to buy?
First and foremost, if you understand its benefit, buy the life insurance now without worrying about the pricing. However, if you know that you will be treated unfavorably as a foreign resident, I would recommend you get a short-term term insurance policy first and then shop again once you can be treated as a U.S. resident. Like I mentioned in my previous blog post here, term insurance is pure insurance with much lower overall expenses compared to a permanent policy. Even if you surrender your term policy in a couple of years, you won't lose much money from the commissions and fees that you initially spend on a permanent insurance policy. You could also learn more about things you should consider besides the price when you are shopping for term insurance from my previous blog posts here.
Last but not least, a well-written cover letter to the insurance company from an experienced insurance agent explaining your insurance needs can be extremely beneficial when it comes to some complicated situations such as buying as a Non-U.S. citizen. Like I said in my previous blogs before, no matter where you get your insurance policy, no discount will be received even you purchase insurance without an agent. So, why not find an independent experienced insurance agent and take advantage of his/her time and expertise to help you find the best policy based on your specific situation.
Full disclosure here, as an independent fee-only financial planner, I do not sell any insurance products or get compensated through any kinds of profit sharing agreement with any insurance agents. I only make insurance recommendations to my clients solely based on their overall financial picture and specific needs.