Final expense life insurance for foreign nationals

Final expenses, such as funeral costs, medical bills, and outstanding debts, can be a significant burden on your loved ones when you pass away. To alleviate this financial stress, many Americans – particularly seniors – get a final expense life insurance policy. If you are a foreign national, this type of policy may be easier to get compared to other, more comprehensive forms of protection. This article will help explain:

• How final expense coverage works

• How they differ from other types of life insurance

• Options available to foreign nationals – and what to do if they need more comprehensive coverage

What is a final expense policy, and how does it work?

A final expense policy, also known as funeral or burial insurance, is a specialized type of life insurance designed to cover the costs associated with your funeral and other end-of-life expenses. The death benefit tends to be relatively small, ranging from $5,000 to $30,000. And while these policies are designed to provide coverage until the policyholder passes away, they don’t build cash value like a permanent whole life insurance policy. Final expense policies are most often purchased by older individuals who don’t need (or might not be able to afford) more comprehensive coverage. The life insurance beneficiary (i.e., the person who gets the payout) is typically a surviving spouse, adult child, or other relative who uses the money to help cover the following kinds of expenses:

1. Funeral costs: These may include a casket, burial or cremation, flowers, and other related services

2. Medical bills: Outstanding medical or end-of-life healthcare expenses

3. Debts: Policies with higher benefit amounts can help settle outstanding debts, such as credit card balances or loans, so that loved ones aren’t burdened with these financial obligations

4. Legal and administrative fees: For example, costs associated with an estate settlement

5. Other expenses: Miscellaneous costs like memorial services or transportation for family members

How final expense policies differ from other types of life insurance

Traditional life insurance policies are typically designed to help support families after a wage earner passes away, with an income tax-free death benefit that can be large enough to replace several years’ worth of income.¹ Final expense insurance is much more limited in scope. Features typically include:

• Lower benefit amounts: Final expense insurance is designed to cover specific end-of-life expenses. Unlike traditional term or whole life insurance policies that can have a benefit amount of $500,000, $1,000,000 or more, it doesn’t provide a payout that can replace years of family income.

• Higher relative cost: While the overall monthly cost may seem low, the cost per $1,000 of coverage tends to be substantially higher than other types of policies.

• No medical exam required: Most final expense policies are simplified issue, which means they don't require a medical examination but may ask questions about your health, or guaranteed issue, which means there’s no medical exam and health-related questions. This makes qualification easier (or even automatic) for older people and those with health issues.

Can foreign nationals get a final expense policy?

The short answer is yes – this type of policy is typically the easiest form of US life insurance to get as a foreign national, especially if you aren’t a permanent resident (i.e., a green card holder). However, not every insurance company (including Guardian) offers this kind of coverage. Among those that do, many will only sell final expense policies to US citizens and permanent residents. However, there are insurance brokers who specialize in working with foreign nationals, and they can often help non-permanent residents get coverage. To do so, you’ll typically need to demonstrate:

1. You live in the US and have financial ties here

2. You have a Social Security Number or ITIN (Tax ID number)

3. You can pay premiums from a US bank account

If you can’t demonstrate all of the above, it will be very difficult to obtain coverage. But it’s important to note that even if you meet these criteria, there may also be other requirements and restrictions, depending on the insurance company. That’s why it’s advisable to work with a broker who specializes in this area and can match you to the right provider.

What about foreign nationals who need more comprehensive life insurance protection?

As a foreign national, eligibility for more comprehensive life insurance largely depends on your legal residency status in the United States, which can be broken down into three main categories: green card holders/permanent residents; non-permanent residents with visas; and non-residents with US ties:

Permanent residents

Non-citizens “green card” holders are generally eligible for the same term and permanent life insurance options available to regular US citizens with a similar risk profile (age, gender, health status, and so on). However, some insurers may require two years of US residency before applying for coverage.

Non-permanent residents with visas

If you hold a valid US visa you may still be able to get more comprehensive coverage, but face more challenges compared to a permanent resident with a green card. Few companies will issue coverage for student visa holders, but the following types of visa holders can often get coverage if they’re willing to shop different companies and overcome some added hurdles:

• E – employer sponsored immigrant visa

• H1B – temporary work visa for someone in a specialty occupation

• K – nonimmigrant visa for a fiancé/e of a US citizen

• L – temporary work visa for an intracompany transferee

• O – temporary work visa for someone with extraordinary ability or achievement

• TN and TD – visas for Canadian and Mexican NAFTA workers

Your coverage options will vary depending on your visa type, duration, and the guidelines of the company issuing the policy. In any case, it’s essential to ensure that your visa is up to date and valid when applying for life insurance, and you can expect carriers to require additional documentation and assessments to accurately analyze your risk profile.

Non-resident foreign nationals with US ties

Some high-net-worth foreign nationals with significant business, financial, and family ties in the US may also qualify for life insurance coverage. These policies are typically quite specialized, and designed to help internationals with personal and business interests in different countries manage their complex affairs. Availability may be limited by your country of residence, and if coverage is offered, the underwriting process can be quite involved.

Despite such limitations, these policies can be an invaluable estate planning and asset protection tool for internationals with family and financial ties in the US. In addition to diversifying their financial portfolio, such policies can help solve the problem of transferring wealth to the next generation: While US residents enjoy a federal estate tax exemption of $12,920,000, the exemption for non-residents is limited to just $60,000. Non-resident life insurance can help bridge this disparity, because death benefit payments are exempt from federal estate taxes.