I received an update on new foreign national life insurance underwriting guidelines today from one of the country’s largest life insurance companies. They announced a liberalization of requirements for Mexican and Canadian citizens.
From past posts you would have noted that while the criteria change from company to company, especially Mexico has been singled out as needing more significant ties to the US such as:
1. Not just business connections, but actually being employed by, if not part owner of a US company.
2. Having substantial investments in the US, some companies requiring that at least 25% of the amount used to justify the insurance death benefit be held in US investments that are at least six months old
3. Property ownership in the US
4. Tax liability in the US
When you add those kind of criteria to the standard criteria of having to apply for, being examined and accept the policy while physically in the US, having a US bank account and mailing address, etc., it has at least held off substantial business from our neighbors to the south.
I’ve also made it clear in the past that US life insurance companies are in no way looking to extend their cheap term portfolio world wide. It’s barely profitable for them to sustain the market here at home. Extending cheap term outside of the country would almost without fail, be a non profit exercise. Having said that there are some of our country’s best life insurance companies who are very interested in offering their products, some of the best in the world, to high net worth foreign nationals. I would defend that business plan by saying that, obviously, the higher the cost of the insurance, the lower the cost of doing business. While that’s true, let’s be realistic. They want to tap the kind of high net worth business that makes companies grow and prosper, as long as it can be done without stepping over the line of US insurance law.
So, I started by talking about new, more liberal guidelines for Mexico and Canada. Let’s start with Mexico where political and drug cartel unrest has kept insurance guidelines strict and insurable retention limits low. This change allows the following:
o Up to $2 million for Term Plans and Riders: however No Preferred Risk Class will be available.
Permanent Plans are limited for up to $10 million (no riders above $2 million) and No Preferred Risk
Class will be available.
o Residents of Juarez, Mexico and vicinity will be limited to $1 million of Permanent Plans. No Term Plans,
Term Riders or Preferred Risk class will be available.
o The jumbo limit is $25,000,000 million and the maximum autobind is $10,000,000 million.
o All parts of the application must be completed in the US; this includes age/amount requirements,
premium payments, etc.
o Lastly, applicants must have a significant business or personal connection with the United States. This
connection must bring the proposed insured to the U.S. on a regular basis and will not be satisfied solely
by a bank account, trust, post office box or an occasional shopping trip. (Underwriters have told us that the “personal connection” can be met by having relatives in the US that are visited on a reasonably frequent basis. Note that it doesn’t require business and personal connections).
For Canada the only change, while significant, is:
We have liberalized the underwriting for Canadian residents. Term products and riders are available up to
a total of $25,000,000. If qualified, the Preferred Risk classification is available. Previously, term
products, riders and the preferred risk classification were not available to Canadian residents.
Please note that these changes are just with one company out of several that I use internationally. All of them have variations on the themes and while this company will only deal with large policies and high net worth clients, others, with a few more hoops, can take up the slack. Remember though that the common thread with all of them is set by law. The application, exam and acceptance have to be in the US, there has to be a US mailing address for billing and premiums have to be paid from a US bank.
Bottom line. For some the hoops are too many and the need isn’t great enough, but it’s worked well for many clients who have found the best value for their important life insurance needs are here in the US. If you have any questions about “the hoops” or if you qualify as a foreign national to buy US life insurance, call or email me directly. My name is Ed Hinerman. Let’s talk.