If you are a U.S. citizen but live abroad, here’s what you need to know about life insurance coverage, and what you can do about it in advance to make sure your beneficiaries get paid in the event of your death.
How Do I Know if My Life Insurance Policy Covers Me While Living Abroad?
You need to look at your policy. It will depend upon how long you have had your policy, the country you are visiting, and what you plan to do while there.
For example, a week-long business trip to Tokyo will be treated very differently than spending three months climbing Mt. Everest. If you die abroad, where you were, what you were doing, whether your life insurance application was accurate, and how long you were away are all factors your insurance company will use to determine whether to pay your beneficiaries.
Are You Living in a Dangerous or Underdeveloped Country?
The first thing insurers consider is where you were living at the time of death. Life insurance companies categorize destinations as belonging in one of three categories:
- acceptable for travel;
- acceptable for travel (with limited coverage depending upon time spent there); and
- unacceptable for travel.
To categorize a destination insurance companies analyze its travel services, government, and general industry data. Insurers also consider a country’s public health and sanitation standards and quality of medical facilities.
Countries with a stable economy and government and with no current natural disasters will be the lowest risk and therefore categorized as acceptable for travel. By way of contrast, countries suffering from war, famine, or flood will be categorized as unacceptable for travel.
It is possible that countries on the same continent are categorized differently. For example, Liberia would probably be considered unacceptable for travel, while Kenya will likely be deemed acceptable.
You may want to call your insurance agent to find out how your current county of residence is categorized.
How Long Are You Planning to Live Abroad?
Insurance companies consider the length of time you will be abroad. A short trip abroad, let’s say, a few days or a few weeks, has no effect on your insurance coverage. However, if you plan to be abroad for longer than six months, be forewarned: your insurer will likely consider you a Non-Resident and put a hold on your coverage until you return.
If you plan to move out of the U.S. permanently, or, if you want to maintain residences in the U.S. and another country, your life insurance company will look into the risk factors discussed prior as applies to your second country and determine coverage accordingly. It is not that your insurer can prevent you from moving to a higher-risk country, but know that your premiums could increase or you could lose coverage entirely if you do.
Are You Planning to Engage in Any Activities That Your Insurer Considers High-Risk?
Finally, your insurer will consider what activities you engage in while abroad. If you plan to live for a time in Spain, if you live in Madrid and visit the famous Francisco Goya museum, that is less risky than living in Pamplona and attending the running of the bulls. Be sure to consult with your insurer so there are no unwelcome surprises for your beneficiary should the worst happen while you are away.
How Your Beneficiary Can Make a Foreign Death Claim
If you die while living abroad, your beneficiary must make a “foreign death claim.” These can be problematic for two reasons:
The Claim is Made During the Contestability Period
In the U.S., most life insurance policies have a “contestability period” which is 2 years from the date the policy went into effect. During the contestability period, your insurance company has the right to investigate the accuracy of the information you gave on your application, and if any discrepancies are found, even if unrelated to the cause of death, the insurer can deny your beneficiary’s claim. Even a small discrepancy, such as stating that you weigh 170 when you weigh 190, can result in claim denial.
An experienced life insurance lawyer can help your beneficiary challenge and overcome denial of their claim under these circumstances.
Your Beneficiary Must Obtain Foreign Proof of Death
An insurance company always requires proof of death to pay a claim. Unfortunately, proof of death is often difficult to obtain when an insured dies abroad. Additionally, given cultural and technological disparities worldwide, it is unlikely that a death is recorded the same way in the destination country as it is in the United States, giving the insurance company an easy reason to deny a claim.
It is common for insurance companies to launch an investigation when given foreign proof of death because they have been victimized by people faking their deaths in the past. In a case of foreign death, beneficiaries need an experienced life insurance attorney to get paid on their claim.
About the Author
Veronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area. She works frequently for busy Philadelphia life insurance attorney Chad G. Boonswang, Esq.