When you apply for life insurance, the insurance company uses a number of factors — such as your family history, age, and gender — to assess insurance risk and determine how much you’ll pay for your policy.
Your location within the U.S. doesn’t impact your life insurance premiums. However, the life insurance industry is regulated by state legislature.
Each state has its own rules about certain aspects of the life insurance industry, such as refunds for new policies, grace periods for late payments, and protections for policyholders and beneficiaries if a life insurance company goes bankrupt.
Can your geographic location affect your life insurance premiums?
Life insurance companies take certain mortality risks — such as your medical history or a dangerous occupation — into account when determining your life insurance premiums, but your geographic location isn’t one of those factors.
You won’t be charged more if you live in a state prone to natural disasters or other risk factors. Although your geographic location won’t earn you higher premiums, each state has its own legislature that impacts your policy.
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How does local legislation impact your policy?
State legislation is the primary governing body for life insurance policies and protections for policyholders.
When you’re going through the life insurance application, you can ask the insurance broker or agent you’re working with about the following specifics that vary state by state.
Free look period: This is the period when policyholders can back out of their policy and receive a refund for their initial premium payment.
Late payment grace period: This is a window of time you have to make up a late premium payment before your policy is legally terminated.
State guaranty association: These state organizations ensure continued coverage and a death benefit if your life insurance company is declared insolvent or bankrupt.
State associations work together through an organization called the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). The organization offers an online tool where you can find your state’s guaranty association.
→ Learn more about your state’s insurance regulations
Can you purchase life insurance abroad?
Generally speaking, insurance companies require you to complete the application and medical exam, as well as sign your final policy, in the U.S.
If you’re an American expat who lives abroad full-time, or otherwise cannot prove residency in the country, your options for purchasing life insurance with U.S. companies are limited.
If you split your time between the U.S. and another country, some insurers might cover you, especially if you live abroad for less than six months out of the year.
If you have a high global net worth, some insurers may be able to cover you as long as you have part-time residence in the U.S.
Working with an independent broker can help you compare options from multiple insurance companies to find the best policy for you, especially if you have more than one country of residence.
Laws about travel
Unlawful travel will disqualify you from purchasing life insurance regardless of where you live.
Interstate or foreign travel is classified as unlawful if you distribute proceeds from any illegal activity, commit a crime or act of violence, or promote any illegal activity, according to the International Travel Act of 1961. [1]
Sometimes, even lawful travel to a location deemed high-risk by the U.S. department of state can impact your life insurance rates.
Depending on the length, frequency, and destination of travel, it’s possible to get a higher risk classification, or be disqualified from purchasing a life insurance policy altogether.
Some states have legislation in place that prohibits life insurance companies from using any planned lawful travel to determine your life insurance policy. These states are:
Life insurance companies also look at your travel history as an indicator of future behavior.
The following states have legislation in place that prohibits life insurance companies from using past lawful travel as a factor in your life insurance risk classification or eligibility:
Connecticut
Colorado
Maryland
Massachusetts
Oklahoma
Washington
Laws about beneficiaries
Where you live can affect who you list as your beneficiaries and how they can receive the life insurance proceeds. This is due to the age of majority — the age someone’s considered a legal adult — in certain states and community property laws.
How does age of majority affect your life insurance beneficiaries?
When you’re naming, either your primary or contingent life insurance beneficiaries, you may be considering listing your child on your policy.
Though you’re likely buying life insurance for their protection, naming your child as your beneficiary isn’t always a good idea.
If your children aren’t legal adults, they can’t claim the death benefit. The funds could get tied up in court and they might not get to access the death benefit when they really need it.
In most states, the age of majority is 18. In Alabama and Nebraska, it’s 19, and in Mississippi, it’s 21.
What to do if your child isn’t the age of the majority
If you’d like to leave your life insurance death benefit to your minor child as opposed to a spouse or other adult family member, you can list your trust as the policy’s beneficiary. A trust allows you to dictate exactly how and when the life insurance payout is spent.
If you know that you’d like some of the death benefit to go toward a college education, you can also designate some of the money to a 529 plan, legally known as a qualified tuition plan, which offers tax-free withdrawals for higher education expenses.
State community property laws
Some states have community property laws in place, which deem all your assets and income as community property.
This means they’re considered jointly owned with your spouse, if you have one. Because life insurance is a form of income replacement, it’s also subject to community property laws.
There are nine community property states and three states that let married couples opt into community property. Puerto Rico and Guam also have community property laws. The rest of the states don’t have community property and use common law instead. [2]
Community property states:
Arizona
California*
Idaho
Louisiana
Nevada*
New Mexico
Washington*
Wisconsin
*Community property law generally extends to people in a registered domestic partnership in these states.
Opt-in community property states:
Alaska
Tennessee
South Dakota
If you’re purchasing a life insurance policy and you live in a state with community property laws, you have to name your spouse as your life insurance beneficiary unless they sign a legal waiver that permits you to list someone else.
Before you purchase a life insurance policy, you can talk to your broker about local laws and regulations to make sure you fully understand how your policy works.
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