Life insurance in the US: Complete guide for expats

As an expat your life insurance needs may look a little different to US citizens and permanent residents. Your decisions may be dictated by how long you plan to be in the US, and the situation your dependents are in during your stay.

This guide walks through common US life insurance options so you can decide if one is right for you.

This guide is for information only and does not constitute advice. Different types of insurance are suitable for different individual needs. Get professional advice and support to choose the right policy for your unique situation.

What is life insurance?

Life insurance generally provides a cash lump sum upon the death of a policy holder. Some policies also have options to add ‘riders’ which may cover living benefits, such as ways to cash in your policy, or to draw a portion of it if you become terminally or chronically ill.

Life insurance is intended to offer financial security for people left behind when a policy holder dies. Some policies may also offer ‘living benefits’ which can be paid out before death. You may want a life insurance policy to make sure your partner or children get some money to help them after your death, or you might want a policy which offers opportunities for cash growth for future use.

Depending on the policy selected, this may allow you to guarantee that your loved ones will have the financial means to continue paying a mortgage, or to relocate to your home country if you’re in the US as an expat, if you die or become ill and are unable to work. Your policy can also cover essentials like funeral costs upon death.

Different types of life insurance are available in the US to meet the varied needs of customers – this guide walks through some which may be suited to the needs of expats to start your research on which policy is right for you.

Types of life insurance available in the US

Generally, life insurance in the US can be split into core categories including:

• Term life insurance
• Permanent life insurance
• Universal life insurance

Within each category there are different policy types, which can suit the needs of different individuals including expats in the US. This guide looks at the most commonly selected life insurance types, and we’ll also touch on Group Life Cover which is usually employer provided as a bonus.

Here’s a quick summary of the key policy types we look at in this guide, with more detail coming up right after.

	Term Life Insurance	Permanent Life insurance	Universal Life Insurance
Target market	Customers looking to offer financial security for families or dependents over a fixed period	Customers looking to leave a lump sum, at the same time as having withdrawal rights	Customers looking for a flexible blend of policy type, with options to change or add to cover over time
Pay out options	Lump sum	Lump sum or cash in value	Lump sum or cash in value, options to add in riders for other requirements
Cover length	Fixed term	Whole of life	Flexible term, or can be whole of life
Costs	Costs depend on different policy and pay out basis	Premiums set based on age, health and other considerations	Costs depend on specific plan – often no health check needed

Note: This guide is for information only and does not constitute advice. Different types of insurance are suitable for different individual needs. Get professional advice and support to choose the right policy for your unique situation.

Term life insurance

Term Insurance is one of the most commonly selected types of life insurance, and often the most cost effective. This insurance pays out a lump sum upon the death of the policy holder, to allow individuals who want to ensure the financial well being of their family in the event of their death.

You can choose policy lengths which may be 10 – 30 years long, and often convert to a permanent policy if you prefer to do so later. You can also add in riders which can cover living benefits to many policies.

Term insurance isn’t the right choice for everyone but the fact you can select the term you want to be covered for may be appealing to expats on short or medium term assignments in the US.

Term Insurance pros	Term Insurance cons
✅ Different policy and payout options depending on individual need ✅ Some policies offer lower premiums with matched cover levels ✅ Choose the term of cover you want – useful if you only need cover while on an expat assignment	❌ Medical many be needed to convert to a permanent policy ❌ Premiums usually depend on the age and health of the policy holder

Permanent life insurance

Permanent life insurance is intended to be used on an ongoing basis, with the policy holder paying premiums right up until their death. This is unlike a term insurance policy which runs for a fixed time in most cases.

Permanent life insurance guarantees a pay out to the beneficiaries of a policy, upon the death of the policy holder, whenever the individual should die. There is also often an investment element in a permanent policy which allows the policy holder to withdraw or cash in some portion of the amount they’ve paid.

This type of insurance may be more suitable to expats moving to the US for good, as policies may be less designed to cope with the long term needs of individuals who live in different countries.

Permanent life insurance pros	Permanent life insurance cons
✅ Death benefit is guaranteed, regardless of when the policy holder dies as long as the policy is maintained ✅ Premiums set according to the cover level you require ✅ Investment element often available in policies, allowing you to cash in some value during life	❌ You must pay premiums for the rest of your life to leave a lump sum upon death ❌ Can be a costly policy overall

Universal life insurance

Universal life insurance offers a blend of term and permanent policy types. This can be a flexible option if you’re not sure what insurance you’ll need, and want a policy to meet evolving needs as you and your family grow older. Policies may have investment elements which allow you to save and grow your cash value pot.

Universal life insurance may be sold as a term insurance format which you can then convert to permanent without a full medical being required. You may also choose to add in various riders to cover different policy areas, to create a customized policy for your family.

This type of insurance may be more suitable to expats who want a policy that can grow with them, as they decide how long to remain in the US.

Universal life insurance pros	Universal life insurance cons
✅ Very flexible policy format allowing you to change and adapt without changing provider ✅ Coverage levels and premiums vary to meet different customer needs ✅ Investment element and various riders often available in policies	❌ Requires regular though to check cover level is where you want it ❌Medical may be needed to change to permanent policy

Life insurance requirements for expats in the US

Whether or not you can get life insurance coverage in the US will depend on many factors, including your residency situation, age, health and the type of policy you need. As a general rule, US providers offer life insurance for US residents only, although some specialist companies may offer more global policies for international use.

It’s important to check specific details for the policy you prefer as some policies have age restrictions, and some products aren’t offered in all US states. Generally, insurance providers will offer a call back service to talk you through the options available once you’ve requested a quote, so you can check the exact availability and your eligibility for different policies then.

How much life insurance do you need?

The amount of life insurance you need depends on many factors. You’ll need to consider what value lump sum you would want to pay out, based on the situation your loved ones would be in if you died.

This is enormously varied. For example, you may have a local or international mortgage which would need to be paid, perhaps your partner has stopped working to support your international move, and would need funds for day to day life, or maybe you’d like to leave extra to cover the costs of repatriation if your family would choose to move home if you were to die.

There are calculation tools available from life insurance providers, such as the Prudential Coverage Calculator which are intended to help you decide on the insurance you need. However, bear in mind that these tools are primarily intended for US citizens and long term residents and may not cover all the factors which are important to expats in the US.

Life insurance costs and premiums in the US

Insurers calculate the premiums payable on a life insurance policy on an individual basis. Factors affecting premium costs include:

• Your age
• Your health
• How long you want the cover for
• The level of cover you need
• Whether you smoke

You will need to talk to an insurance broker, or use online calculator tools to generate a few quotes based on your unique information, to get a feel for the premium costs and options you’re likely to have.

Buying life insurance in the US as an expat

Buying life insurance in the US as an expat should not be complicated as long as you’re a legal resident and can provide all the documents and information the specific insurer requires. Here’s an outline of the usual process:

Step 1: Decide on the cover and policy type you require

Consider the cover level you need, and the policy type – term insurance or permanent life insurance, for example. Get professional advice if you’re not sure which policy is right for you.

Step 2: Shop around to generate quotes from different providers

Most insurers offer a call back service to allow you to get an indicative quote for premiums and costs. Or you can use a broker to get quotes for you, to decide the right policy for your family.

Step 3: Apply online, uploading any required documents

You can usually submit your application online, and will be asked to upload documents proving your identity, address and legal residence in the US. Depending on policy type you may also need to provide health, employment and other information and paperwork.

Step 4: Undergo medical checkups if needed

Some policies will accept your medical information without checkups – others require you to attend an in person appointment to verify your health.

Step 5: Receive your policy document and start paying premiums

Once your policy is prepared you’ll be sent all the relevant paperwork to review and you can start to pay your premiums.

Employer-provided life insurance

Employer-provided life insurance, which is also called Group Life Cover, is a benefit available for some US employees. For example, the US government’s Office of Personnel Management runs the largest Group Life Cover program in the world, offering this benefit to 4 million+ Federal employees and their families.

Group Life Cover usually provides for a pay out of a fixed lump sum, calculated in reference to your salary, if you were to die in service. Your beneficiaries may get a pay out of 3x your salary, for example, subject to specified terms and conditions. Fees may apply to get this benefit which can be deducted from your salary.

Ask your HR department if this is provided in your workplace.

International life insurance vs local coverage

Standard US life insurance policies from major providers usually require you to be a US resident. If you don’t have life insurance when you move to the US, taking out a local policy could be an option to cover you while you’re in the country.

If you already have a life insurance policy in your home country you will need to talk to your insurer to understand what happens when you move overseas.

Customers who are looking for a policy which can remain open wherever in the world you live, will likely need to talk to a specialist broker and look for offshore insurers which have more flexible residency policies compared to major US insurers.

If you need to pay for life insurance premiums in your home country or in foreign currencies, consider using Wise to make your overseas transfers.

Wise offers one off and recurring payments and uses the mid-market exchange rate with low fees, and offers transfers to 140+ countries globally. This can help ensure your recurring bills are paid seamlessly and without excess costs.

Life insurance beneficiaries and international considerations

If you’re an expat in the US you may want to name individuals in a different country to be your beneficiaries in the case you were to die and your policy pays out. This may or may not be possible, depending on the policy and the country involved.

You may need to take professional advice to check the policy you have selected is suitable for your specific situation. Some important questions to think about include:

• Is naming beneficiaries in different countries possible?
• What are the tax implications for international beneficiaries based on their residency?
• What is the payout procedure if your policy pays out to someone overseas?
• How does currency conversion work if there’s a cross border payment?

If you’ve received a payment which you need to move overseas, choosing a provider like Wise can help mitigate some of the concerns about managing money across currencies.

You can send payments with the mid-market rate, or receive payments in 20+ currencies and hold money in 40+ currencies, in a Wise account.

Life insurance when moving countries

Life insurance providers set their own rules about policy eligibility, which may include requiring US residence. If you’re moving from the US to another country and have an active life insurance policy here, you’ll need to check with your insurer if you can maintain your policy from another country. If not, you may need to close it and open a new one once you relocate.

Tax implications of life insurance in the US

Some payouts on life insurance in the US can offer a death benefit tax-advantage – but this isn’t always the case. As tax matters can be complex – and get even more complicated when dealing with different countries – you will need to get professional advice about the potential tax implications of life insurance in the US in your situation.

There are some tools which may help, like the IRS interactive tax assistantwhich offers an interview that you can complete to check if your life insurance pay out should be taxed. However, this isn’t a substitute for in person, professional advice.

Remember the tax implications may not be limited to the IRS in the US. Depending on the policy you have and its intent, as well as your home country’s rules on taxation on insurance, you may find tax is owed there on a life insurance cash pay out or death benefit.

Life insurance and estate planning

The US has a Federal estate tax which may apply on high value estates of around 14 million USD. Some states also have inheritance tax which is paid by the beneficiaries of an inheritance.

Some people choose to plan their life insurance to allow a payout upon death which could cover the costs of inheritance or estate taxes, to make sure their beneficiaries do not need to sell assets instantly to generate the cash to pay their taxes. This option isn’t always necessary, as these taxes don’t apply in all cases due to their targeted nature.

If you’re planning how your finances might work in the event of your death in the US it is important to get professional advice to structure your assets most appropriately and remain within the law.

Common life insurance mistakes to avoid for expats

Before you decide on the policy for you, consider these common life insurance mistakes to avoid for expats:

• Choosing the wrong policy type for expat lifestyle – not all policies are right for people living overseas. Get professional advice when you choose
• Underinsuring – bear in mind that your dependents may have different needs while you’re living internationally, and you may want to raise your lump sum accordingly, to pay for relocation for example
• Underestimating currency costs – fluctuations in currency rates could mean you have not selected a policy which matches your needs
• Failing to update beneficiaries after moves – make sure your insurer has your most up to date information at all times
• Letting coverage lapse during relocations – check if your policy is valid after a planned move, and make sure you continue with premiums if it is

Life insurance claims process

If a loved one dies and you need to submit a life insurance claim, you’ll first need to get in touch with the insurer to report their death. To make the process easier you may need to find the policy number, and you can check the additional information the insurer needs when you speak to their service team.

Usually you will be asked to submit a death certificate upon receipt and other relevant paperwork like your own ID documents. Once a claim has been approved it will be paid out according to the policy type.

Getting professional advice in the US

The National Association of Insurance Commissioners has tools to help you find licensed insurance providers and professionals on a state by state basis. This can be a good place to start your search for appropriate life insurance in the US.

Individual insurers also often offer advice services to help you pick out a policy. If you choose to use an individual provider’s advice services, compare costs and coverage against other providers before you sign up to make sure the product is the most suitable on the market for your needs.

Conclusion

Life insurance can offer peace of mind that your loved ones will be protected if you were to die. In the US you usually have to be a local resident to take out a life insurance policy, which means that choosing the right policy as an expat might take a little research. This guide walks through some basics of the types of policy available – and you can also get professional advice through a broker to help you choose the right service for your needs.

If you’ve received a lump sum payment which you need to repatriate or convert to a different currency, remember you can make high value payments from the US, to 140+ countries, with Wise.

Wise uses the mid-market rate with no markup to worry about, and fee discounts on high value payments over 20,000 GBP. This helps with keeping costs low and making the process to transfer overseas simple, convenient and cheap.

Useful Resources

• Wise – Wise international payments, multi-currency account and card (US)
• Life insurance – National Association of Insurance Commissioners explainer on life insurance
• Prudential Coverage Calculator – work out how much cover you may require
• Office of Personnel Management -Group Life Cover for many Federal employees and their families
• IRS interactive tax assistant – tools to help decide if your life insurance pay out should be taxed 
• Federal estate tax – US government information on estate taxes

National Association of Insurance Commissioners – find an advisor to help you plan your insurance needs