3 Things Every Backpacker Should Know About Life Insurance
If you are a U.S. citizen but frequently travel abroad, here are the three most important things you should know about your life insurance coverage. You’re a planner – you would not be reading this unless you had a life insurance policy, and if you have a life insurance policy you are concerned with providing financial security and protection to loved ones, or your business partners. Armed with this knowledge you can plan in advance to make sure your death benefits are paid exactly as you intend. Everyone makes mistakes, but the typical farang mistakes are potentially fatal so it’s best to plan for the worst.
1. Life insurance will not necessarily cover you while traveling to certain places, or for a long period of time.
If you plan to travel to a dangerous or underdeveloped country, look at your life insurance policy. There may be a provision stating that the death benefit will not be paid if you travel to certain destinations and die while there.
Insurance companies place foreign destinations in one of these three categories:
- Acceptable for travel;
- Acceptable for travel, but coverage is limited depending upon time spent there; and
- Unacceptable for travel.
Insurance companies look at the stability of government, travel services, general industry data, public health and sanitation standards, and the quality and quantity of medical facilities. As you might expect, those countries with a stable government and economy will be considered the lowest risk and therefore acceptable for travel. Countries suffering from either war, famine, flood, or other natural disasters are unacceptable for travel.
Most foreign destinations fall somewhere in between, thus the time limit on time spent there. You should call your insurance agent to find out how your destination(s) are categorized and if you should be limiting time spent at any one destination, or avoiding a destination altogether.
How Long You Spend in a Foreign Country Matters
A short trip of a few days or even a few weeks will likely not affect your insurance coverage. However, if you think you will be traveling abroad for more than six months at a time, know this: your insurance company can categorize you as a “non-resident” and put a hold on your life insurance coverage – meaning, you are not covered!.
If you are considering keeping residences in the U.S. and in some other country, your insurance company will look into the risk factors as applies to your second country and determine coverage accordingly. While your insurer can not prevent you from living half the year in a higher-risk country, it can increase your premiums or cancel your life insurance coverage altogether.
2. Life Insurance will not cover you if you die while engaging in undisclosed high-risk activities.
If you are planning to engage in any activities that your insurance company considers high-risk, you should let them know. If they know what you are doing while abroad, they can adjust your premiums accordingly. Failing to disclose that you plan to go mountain climbing or scuba diving with sharks will likely result in claim denial should you die doing that.
3. Your beneficiary’s foreign death claim can easily be denied for two reasons.
If you die while abroad, your beneficiary will file a “foreign death claim.” Two problems often arise:
1. You Die Within the Contestability Period
The “contestability period” is the period of time 2 years from the date you take the policy out, during which the insurance company has heightened power to investigate the veracity of the information you disclosed on your insurance application, and deny your beneficiary’s claim for any mistake or omission they find – even if wholly unrelated to the cause of death!
Any small mistake or misstatement, such as stating that you were born in 1965 when you were born in 1956, can and will cause your beneficiary’s claim to be delayed or denied. In that case, an experienced national life insurance attorney can help your beneficiary get paid under these circumstances. But since you are a planner, plan in advance – be sure that all of the information your insurer has on you is true, and that you’ve not omitted anything.
2. Foreign Proof of Death is Insufficient
To pay a death benefit claim, insurers require proof of death. This can be difficult to get when the insured dies in a foreign country. And even when the proof is obtainable, it is often not in a form that is acceptable to insurance companies – for example, it is not notarized, or the medical examiner was not a doctor, or if a homicide, there was no police report included.
In this case, you cannot help your beneficiaries – but an experienced life insurance attorney can. In the meantime, review your policy provisions and talk to your agent about where you plan to go and what you plan to do there.
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.