Can I Buy U.S. Life Insurance if I Live in Canada?

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Article Contents
Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated on October 22, 2024

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Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated October 22, 2024

Visit author page

4 minute read

Article Contents

Purchasing life insurance provides a financial cushion for individuals and families in the face of death. Through life insurance, individuals can provide their loved ones with a tax-free benefit – but this may not be true for cross-border policies. 

As a Canadian, you may wonder why you’d ever need to purchase an insurance policy in the United States. You’d be surprised to know there are many reasons – maybe there are opportunities for cost savings or broader product offerings. Whatever the case, it’s best to explore the potential advantages, disadvantages, and limitations of buying life insurance from US companies as a Canadian citizen before deciding.

US Life Insurance for Canadian Residents At a Glance

  • Canadian residents can purchase life insurance in the US, considering they meet the eligibility requirements.
  • You might purchase a US life insurance policy for budget reasons or to access a wider range of insurance products. 
  • If you are purchasing a US life insurance policy as a Canadian, you must be aware of the regulatory and legal implications and choose a company carefully.
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Buying US Life Insurance as a Canadian Resident

Canadians can purchase life insurance in the US depending on their status. You may qualify if you have a green card or are a specific type of visa holder. However, requirements may vary depending on the insurance company you choose.

Requirements for Canadians Purchasing US Insurance

As a Canadian, you can qualify for an American insurance policy if you have the following:

  • An American bank account
  • A social security number or tax ID
  • A US-based residential address
  • A temporary green card
  • Dual citizenship
  • Asylum or refugee status
  • A spouse who is a US citizen or permanent resident
  • Real estate in the US
  • A business in the US
  • A source of US funds you can use to pay premiums
  • The application requirements, medical exam, and other documents completed in the US
requirements for canadians purchasing us life insurance

Factors to Consider When Purchasing US Life Insurance as a Non-US Citizen

While Canadian residents can purchase US life insurance, the process and standards may differ significantly. Here’s what to consider. 

Regulatory Differences

While this may ultimately depend on company differences, health requirements between US and Canadian insurers may vary. Some companies may have stricter underwriting guidelines that require more medical testing unless you purchase a no-medical life insurance policy.

In addition, occupation ratings in both regions are different. How your career influences your premiums in Canada may be a bigger or smaller factor in the US. 

Tax Implications

Life insurance death benefits are typically tax-free. However, any cash surrender value or dividends earned from a US insurance policy may be income taxable in Canada. If you’re also a US citizen or resident, the tax treatment of the death benefit may differ.

Estate taxes are where it gets tricky. The death benefit may also be subject to estate tax if you own a US-taxable estate. Rules and exemptions surrounding taxes will ultimately depend on your US residency status and the value of your estate.

Ultimately, to decide whether an insurance policy is tax-free in Canada, it must undergo the Exemption Test Policy (ETP), which limits the amount of money the policy can accrue. The authorized body will check this policy against the ETP annually and subject it to tax if it grows beyond the limit.

Legal Considerations

Legally, contractual terms and conditions may vary in the US if a Canadian resident purchases a life insurance policy. Factors like dispute resolution, claim processing, and provision enforceability may vary. Other legal considerations that may impact your premiums and claims processing include:

  • Residency: Some US insurance companies have specific residency requirements. For example, a company might require you to maintain continuous residency in the US for a particular period before qualifying for a policy. Other companies may define residency based on domicile instead of physical presence. 
  • International claims and currency: If you file a claim outside the US, you may be subject to delays. In addition, currency exchange fluctuations can impact the final death benefit amount.

Pros and Cons of Purchasing US Life Insurance as a Canadian Resident

If you’re a Canadian resident, why buy a US insurance policy? Here are the benefits to consider:

Lower premiums:

While your premiums will depend on your age, marital status, insurance history, and other factors, some US insurers may offer lower premiums for specific age groups and health conditions.

Broader product range:

Some US insurance companies offer a more comprehensive range of products, such as unique riders or bespoke coverage options.

Currency exchange:

You can get a higher death benefit when the Canadian dollar is stronger than its US counterpart.

However, purchasing US life insurance as a Canadian resident may also have drawbacks: 

Regulatory complications:

Navigating regulatory differences between Canadian and US insurance companies can be complex and time-consuming, depending on your unique circumstances.

Challenges in the claims process:

Not only may your claim be subject to additional steps, but you may have to file additional paperwork and become subject to significant delays.

Limited customer service:

Even as a dual Canadian and US resident, you may have limited access to customer service if your primary residence is outside of America. Limited access to help can make resolving issues or obtaining information challenging.

What is the Best Type of Life Insurance for a Canadian Resident in the US?

Like in Canada, US insurance companies typically offer two basic policies: term life insurance and permanent life insurance. So, which one is better for a Canadian resident? 

Term life insurance is the best option if you have children, a mortgage, or are looking for an affordable insurance option. It may also be an appropriate option for Canadian residents needing flexibility, as term life insurance policies allow you to customize: 

  • Coverage amounts
  • Term length
  • Riders

If budgeting isn’t a big concern, you might consider getting permanent life insurance, as it protects your loved ones financially no matter when you die. In addition, your policy can earn dividends. Still, keep in mind that this component can be complex.

Key Advice From MyChoice

  • Seek advice from a qualified life insurance professional who can guide you through the differences and nuances between Canadian and US life insurance policies. They can also assist you in the application process, preparing you for regulatory differences and tax implications. 
  • Keep an eye on currency exchange fluctuations. Consider hedging strategies and stay aware of any potential changes.
  • Consider the long-term implications of buying a US insurance policy, such as possibly filing claims outside the country.

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