.Jane Mepham, CFP (00:04.492)

What is English for life insurance, and how does it apply in a cross-border context?

In today's shortie episode, where in 10 minutes or less, we pick a term used in the cross-border space, we'll talk about what life insurance is, very high level, and whether you need it or not, and when you'd need it in a cross-border context.

Manasa Nadig, EA (00:30.707)

Alright, so Jane, what is life insurance?

Jane Mepham, CFP (00:35.936)

Okay, like the way you just jumped into it, but that's perfect. So, I'd like to think of life insurance as a contract between you, the insured and the insurance company. And essentially, what they're saying is you pay us a certain amount of money over a certain period of time. Obviously, there's more into it, and God forbid you get hit by a bus, we'll give a boatload of money to the person you've appointed to the beneficiary. In other words, think of it as we're replacing your income. So, if you have kids or family overseas, you're supporting and you were not there, what happens to them?

Manasa Nadig, EA (01:21.459)

That's essentially what life insurance is. Now, can we talk about what are all the different types of life insurance?

Types Of Life Insurance: Term And Permanent

Jane Mepham, CFP (01:32.96)

Okay, again, high level, this is a shortie. There are two types of life insurance that we commonly discuss in this space. One is what's called term life insurance.

Term life insurance gives you a certain amount of time, right? So, you buy a policy for let's say 30 years and you pay more or less the same amount, although you do have different ways of paying it, once the 30 years are over, you're done.

Sort of like the car insurance. If, during those 30 years, something happens to you, your beneficiary will receive a payout of whatever the face value was. So, let's say you do something like a 30-year term, with a million dollars, and 25 years into it, something happens to you; your beneficiaries will receive the $ 1 million.

And then the second type of life insurance is what's called permanent life insurance. And under this, there's two, there's whole life and there's universal, but I won't go into the details.

The main differences, there's a death benefit, one, but there's also what's called a cash value. So, something happens to you after a certain period of time, your beneficiaries will get a certain amount of death benefit, but there's also a certain amount of cash that goes along with that, that you can actually take out at some point, depending on the details of the contract.

These ones tend to be a little bit longer, so you can go to a hundred years or something like that. And that's key for the next thing I think you might ask me, but let's move on.

Manasa Nadig, EA (03:14.108)

Yes, you guessed it. Next, can we discuss what type of insurance would be suitable, especially in a cross-border context?

Life Insurance And The Cross-border Considerations

Jane Mepham, CFP (03:30.702)

Okay, so the people that we work with, have foreign nationals and work visas, and we know these work visas are non-immigrant visas, so the assumption is, or not the assumption, you're going to be leaving the country at some point at the end of your term, unless, of course, you end up getting the green card and you end up staying.

And then we have the second group, they're already here on green cards, or they're U.S. citizens, but they have assets, or they have ties overseas.

And then you have U.S. expat, which are U.S. citizens or green card holders who live overseas. So, when I think of that group, and this is where each case is very specific and needs to be custom designed, but at a very high level, if you're the main breadwinner for the family and you're supporting kids and family overseas, the term life insurance...most likely makes sense for you.

Again, remember, we're just trying to replace you. This is not about wealth building; we're not thinking of that. We're just replacing you in terms of support. And so, if you're working and a W-2 employee, term life insurance makes a lot of sense.

The only difference is, or the key thing to watch out for is, the time-life insurance from a company that's willing to pay out, pay to your beneficiaries, regardless of where they live.

And those are the type of companies that we use in all practice. As long as you continue paying the premiums, and we can discuss how you do that, and you end up leaving the country, you will continue paying for 20 years. If something happens to you, these U.S. companies should still be able to pay your beneficiaries that amount.

That’s probably the best case for term life. And it's almost what I advise everybody to get.

Using Life Insurance To Mitigate The 60k Estate Tax Exemption

The second case, the permanent, the universal, the whole life portion of it, the best-case scenario for it when you're in a cross-border context is if you become an NRI, non-resident, which is a word alien, but that's what the IRS uses. You know what I mean.

Jane Mepham, CFP (05:47.254)

And you're not in the US anymore and you have what's called U.S. Situs asset. This is, let's say, shares, property, and you're not here, there's a very high possibility that your estate taxes, the exemption you have is 60K, not the current 15 million that almost everybody else has.

So if your exemption is only 60k what this means is God forbid something happens to you your family most likely will have to sell everything because they need to pay 40 % taxes on anything over 60k so this is a really good use case for a permanent contract because you wanted to go on for a long time but of course you'd want to make sure you find the right people to design this for you so something happens to you there's this estate taxes your family needs to pay, the life insurance will pay out.

Because remember, at that point, it's not going to be taxed. It covers the taxes and your family can enjoy the money.

And so those are probably the two use cases that I can think of right now, contrasting use cases in the cross-border context when it comes to life insurance. There's a whole lot of other use cases, but I think those are probably the two main ones that would apply to just about everybody in this space. Does that answer your question?

Manasa Nadig, EA (07:17.391)

Yes, that perfectly answers all our questions and I'm sure it answers our question on “what is English for life insurance?”. So now that we've learned about that in this shortie episode, thanks for listening to friends and thanks for stopping by.

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